The Elder and Disability Law Firm, APC May 9, 2019

California parents of special needs children understandably want to do everything possible to make sure loved ones unable to care for themselves independently will have access to important financial resources. However, setting funds aside presents possible issues with eligibility for government assistance. One way to resolve this problem for parents looking to plan ahead is with an estate planning tool known as a special needs trust (SNT).

A special needs trust allows funds to be set aside without jeopardizing eligibility for government assistance. It's designed to allow for future support for a dependent. The assets in an SNT are invested and managed by designated trustees, who are typically other family members or trust professionals. Funds in the trust are also protected from creditors and lenders. Additionally, the creator of the trust (grantor) normally has control over what happens with remaining funds when the beneficiary passes.

If the disabled person who will be the beneficiary owned property before they were disabled, they may benefit from a first-party or self-settled SNT. This can also be an effective estate tool if there's a court-mandated settlement or inheritance the beneficiary has already received from another source. The trustee of a self-settled SNT must also reimburse the state for benefits the beneficiary received during their lifetime. With a third-party special needs trust, a party other than the beneficiary funds the trust, and other beneficiaries can be named to receive assets.

A trusts & trust administration lawyer can help a client with a disabled beneficiary determine the most effective way to set up a special needs trust. One option is an ABLE account, which is a state-managed trust that offers appealing tax benefits for the disabled beneficiary. If caregivers are short on resources to provide proper care, a lawyer may recommend a pooled asset trust managed by non-profit organizations to allow them access to funds.

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