IMPORTANCE OF A SPECIAL NEEDS TRUST
Jan. 27, 2022
If you are disabled in California, you can qualify for benefits under the Supplemental Security Income (SSI) program of the Social Security system and at the same time qualify for medical care under Medi-Cal, but these programs have both income and asset limitations.
The California Department of Social Services (CDSS) also offers an In-Home Support Services (IHSS) program that provides domestic, paramedical, and personal assistance services for people with disabilities to live independently or maintain employment safely. IHSS also has income and asset limitations needed to qualify.
Likewise, to receive housing assistance from the Department of Housing and Urban Development (HUD), you are also limited in assets and income.
Together, these programs cover only food, shelter, and medical care. How, then, do you pay for the other necessities and niceties of life?
The answer is through a special needs trust (SNT), which covers the rest of life’s needs without jeopardizing public assistance.
To learn more about establishing a special needs trust, contact The Elder & Disability Law Firm, APC. We can help you provide your loved ones with the added resources they need to better enjoy life while on disability. The team proudly serves clients from the office in Redlands, California, including those in the nearby communities of Rancho Cucamonga, Palm Springs, and Riverside.
WHY A SPECIAL NEEDS TRUST?
Sometimes, it’s hard to qualify for disability assistance programs if your assets are too high, yet the benefits provided are often insufficient to provide for a full life. For instance, to qualify for SSI and Medi-Cal (which launches immediately when you qualify for SSI), your assets cannot exceed $2,000, but you are provided some exemptions, including:
Your primary home
Your household goods and belongings
A life insurance policy with a top face value of $1,500
A prepaid burial plan (unlimited in value if irrevocable, $1,500 maximum if revocable) and a burial plot
Social Security also limits your income to $954.72 if you’re single, $1,598 if married.
In addition, your family or friends can establish a special needs trust administered by a third party to help pay for other living expenses. Living expenses include housekeeping, cooking, personal assistance, medical expenses not covered by Medi-Cal, yard services, home security, pet care, and attorneys’ and accountants’ fees. The disbursement of funds will not jeopardize your benefits so long as they do not cover food, shelter, and medical care (except when it is not covered).
HOW TO SET UP AN SNT
First off, as noted above, the trust must be administered by a trustee other than yourself. A trustee could be a family member, friend, or an institution like a bank. The trustee must distribute funds only when they do not conflict with the benefits you’re receiving.
To qualify, the SNT document itself must specify that:
The trustee will decide when and how to disburse funds to you, the beneficiary.
The purpose of the trust is to supplement the public services you are receiving.
The beneficiary cannot sell or give away their rights under the trust to anyone else and personally has no control over the trust.
Anyone can give money to the trust by writing a check or naming the SNT in a will or living trust.
TYPES OF SNTS
The trust described above, which is established by someone other than the beneficiary (the disabled person), is called a third-party special needs trust. Since such trusts contain no assets belonging to the beneficiary, should the beneficiary pass away, the trust funds can usually be cashed out.
A self-settled or first-party trust is established using the disabled person’s assets, which are then assigned to a trustee to control and disburse for qualifying expenses. In a first-party trust, when the beneficiary passes away, the assets must be used to reimburse for the public benefits received from Medi-Cal before any cashing out can take place.
WHAT IS AN ABLE ACCOUNT?
In 2015 California established what is known as the CalABLE program for individuals with disabilities. The program allows those receiving SSI, or even Social Security Disability Insurance (SSDI), to sock away $15,000 a year in an ABLE savings account to be used to enhance their living conditions while not jeopardizing their public benefits.
You can also qualify if you have a condition included in the Social Security Administration’s “List of Compassionate Allowances Conditions,” or if you can provide a “self-certification” and diagnosis of your condition. However, to participate in CalABLE, you must have developed your disability before age 26.
The account’s earnings can accumulate tax-free, and the withdrawals applied to qualifying disability expenses are tax-free.
HOW LEGAL COUNSEL CAN HELP
Every person and every family’s situation is different, so when weighing which type of SNT is best for the disabled person in your family, you need to seek the guidance and counsel of attorneys with experience in trust planning. You will also need their help in establishing a special needs trust that meets all legal requirements and is administered prudently by the trustee.
The attorneys at The Elder & Disability Law Center, APC, in Redlands, California, can help assess your current situation and your needs going forward. They can guide you into establishing the trust instrument best suited for you and yours. Contact them today wherever you are in the service area. They also serve the communities of Rancho Cucamonga, Palm Springs, and Riverside.