WHAT TO KNOW ABOUT FIRST-PARTY SPECIAL NEEDS TRUSTS
Jan. 27, 2022
The Social Security Administration (SSA) and other state and federal agencies operate programs to provide benefits for those who become disabled. The SSA’s Supplemental Security Income (SSI) program sets income and asset limitations on those who apply for its benefits.
These limitations apply across the board for other programs, including Medi-Cal, housing assistance from the Department of Housing and Urban Development (HUD), and California’s In-Home Support Services (IHSS).
Once you qualify, the problem is that the benefits you receive as a disabled person cover only basic living, food, and medical expenses. The rest is up to you, but if your assets or income are too high, you may not qualify in the first place, or you may find your benefits curtailed or canceled down the road.
The way around having assets disqualify you or diminish your benefits is by setting up a special needs trust (SNT) account. Your family or friends can establish one for you in a third-party SNT. You can also set one up with your assets in a first-party SNT.
Once funds are in the trust, however, a trustee will control the distribution to you, the beneficiary who is disabled, and the funds can be used only to supplement your public benefits. Also, you can never gain or regain control of the assets in the trust yourself.
If you’re disabled and on SSI and Medi-Cal or other benefit programs and you want to supplement your living expenses through a special needs trust in or around Redlands, California, contact The Elder Law & Disability Law Firm, APC. The team proudly serves clients in Redlands, including Rancho Cucamonga, Riverside, and Palm Springs, California.
FIRST-PARTY SPECIAL NEEDS TRUST
First of all, a first-party SNT is funded with your assets, but you can not manage the trust. An independent trustee (family member, friend, or an entity like a bank) will need to manage the assets, and disburse funds only for expenses that your public benefits do not pay.
These expenses can include daily-living needs such as housekeeping, laundry, dry cleaning, gardening, caregiving transportation, attorneys’ and accountants’ fees, and expenses not covered by government programs essential to living, even cable TV charges.
For example, a trustee can distribute SNT funds to pay for education expenses, a vacation, or hobbies. Funds associated with food and shelter are covered by SSI.
To qualify for a first-party SNT, you must be under 65 years of age. If you are a minor, then a parent, grandparent, or court-appointed guardian must set it up. Funding must be solely from the beneficiary’s assets.
WHEN IS A FIRST-PARTY SNT APPROPRIATE?
You may not have many assets when you first go on SSI; however, if you receive money from divorce, inheritance, court judgment in a case or lottery winnings, you can place these funds in a first-party SNT to avoid trouble with disqualifying for your benefits.
A first-party, or self-settled, SNT is also useful when a person without a prior disability owns assets in their name, later becomes disabled, and needs to qualify for public benefits that have an income or asset limitation.
HOW MEDI-CAL FIGURES IN
Note, however, that while assets placed in a third-party SNT can be retrieved should you pass away, the assets in a first-party SNT will be subject to claims by Medi-Cal to be reimbursed for the money spent on your behalf. Thus, a first-party SNT must be irrevocable – no one can alter or cancel it.
HOW LEGAL COUNSEL CAN HELP
Special needs trusts must contain language limiting their use to expenses that supplement a disabled person’s living needs and do not allow the beneficiary any control over them. The team at The Elder & Disability Law Firm, APC, has helped countless others set up SNTs and will be happy to meet with you, help assess your situation and needs, and seek to provide clear guidance on how to move forward to implement an SNT.
The Elder & Disability Law Firm, APC, proudly serves clients in Redlands, Riverside, Rancho Cucamonga, or Palm Springs, California. Contact us for an initial consultation.