The primary purpose of a third party California special needs trust is to preserve government benefits for disabled beneficiaries who would otherwise not qualify for benefits because of an inheritance. Usually the benefits involved are from government programs that have eligibility requirements. By creating a California special needs trust, the beneficiary will not be disqualified from receiving government benefits.
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A Special Needs Trust is often used when a parent wishes to leave an asset directly to a disabled adult child – called the beneficiary. The Special Needs Trust can be established in a parent’s living trust or will. This type of trust would not be under the control of the child, and the child would not be able to revoke it or use the assets for their own purposes.
A Special Needs Trust has an independent trustee who administer the trust for the lifetime of the child. The trust can pay for services required by the beneficiary, such as telephone, education, car repairs, etc., without affecting the beneficiary’s eligibility for the government programs. The trustee, however, would not make cash payments to the beneficiary because the payments would be counted as income for the child which could affect any government benefits being received. The trust could also own a home for the child, thereby reducing the child’s expenses for rent, although there may be some reduction in Social Security benefits as a result.
Benefits of Special Needs Trusts
The Third-Party Special Needs Trust has no obligation to notify the state or pay back Medi-Cal payments after the beneficiary’s death because the beneficiary did not own the assets. This type of trust prevents the beneficiary from controlling the assets, but also maintains a means of helping the beneficiary with the assets held by the trust.
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