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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Special Needs Trust
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 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.
Legal Arrangement
A special needs trust is a legal arrangement and fiduciary relationship that allows a physically or mentally disabled or chronically ill person to receive income without reducing their eligibility for the public assistance disability benefits provided by Social Security, Supplemental Security Income, Medicare or Medicaid. In a fiduciary relationship, a person or entity acts on behalf of another person or people to manage assets. This type of trust is a popular strategy for those who want to help someone in need without taking the risk that the person will lose their eligibility for programs that require their income or assets to remain below a certain limit.
Key Takeaways
A special needs trust is a legal arrangement that lets a physically or mentally ill person, or someone chronically disabled, have access to funding without potentially losing the benefits provided by public assistance programs. This trust allows for the additional financial support of an individual with special needs, without risking bumping them out of contention for disability benefits. Public assistance programs set up for people with special needs are predicated on certain income and asset restrictions; money put in the trust doesn’t count toward the purpose of qualifying for public assistance.
Independent Trustee
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
The third party 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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