As the parent of a loved one with special needs, you know the many financial, medical and social challenges involved. You are no doubt concerned about obtaining the assistance you need now and ensuring your loved one will be properly cared for when you can no longer provide that care yourself. At Santa Barbara Estate Planning & Elder Law, we can protect your child’s eligibility for Medi-Cal, Supplemental Security Income (SSI), and other government benefits while procuring the maximum amount of public and private resources available to you.

Special Needs Estate Planning focuses on providing for the special needs of our loved ones with disabilities when we are no longer there to organize and advocate on their behalf. Parents of children with special needs must make careful estate planning choices to coordinate all of the legal, financial, and special care needs of their children – both now and in the future.

An Overview of Special Needs Estate Planning

Special needs planning is a specialized area of the law that focuses on protecting public benefits for people with special needs, while at the same time facilitating a higher quality of life. A special needs plan can provide a framework for proper medical care and management of assets, as well as protect assets from creditors and predators.

Where there are a number of different types of Special Needs Trusts available, in California, the two most common in are First Party Trusts and Third Party Trusts.

First Party Special Needs Trusts must be set up by a parent, grandparent, legal guardian, or the Court for the sole benefit of a person with special needs. The Trust must be established with money owned by the person with a disability. First Party Special Needs Trusts are subject to the payback provision, which means that when the beneficiary dies, the trustee must use any remaining trust assets to repay the state of California for all benefits provided by the state to the special needs beneficiary.

Third Party Special Needs Trusts are funded with assets of someone other than the beneficiary. They are the most common and effective way for parents to provide for a child with a disability, and they are not subject to the payback provision. Typically, Third Party Trusts are established through a Revocable Living Trust or as a Stand-Alone Trust. It can also be established through a Will. Benefits of a Third Party Trust include:

  • No requirement that the state of California be paid back
  • Trust provisions can be flexible and drafted in accordance with your wishes and desires for the beneficiary, within the guidelines allowed by law
  • Trustees and successors know what to expect and can prepare/train accordingly
  • If laws change, the trust can be amended
  • Ensures that trust assets stay in the family
  • Can include special provisions such as a Care Manager, specific types of distributions and authorization for the trust to be terminated if the beneficiary is no longer disabled or in need of government benefits
  • Improved quality of life

A Special Needs Trust gives the beneficiary indirect access to a fund that can provide for his or her supplemental needs. This can dramatically improve the beneficiary’s quality of life, by providing for:

  • Housing (although this may cause a reduction in benefits)
  • Food (distributions for food may also cause a reduction in benefits)
  • Clothing
  • Household furnishings
  • Utilities
  • Educational expenses
  • Insurance
  • Musical instruments
  • Medical procedures or therapies not available through government assistance
  • Medications (not covered by benefits)
  • Supplemental nursing home care and private companion services
  • Geriatric care services
  • Travel expenses
  • Entertainment expenses such as movies, concerts or electronic equipment
  • An automobile
  • Attorney fees
  • Other expenses, services or products not provided by a government assistance program

Additional benefits of a Special Needs Trust include:

  • Freedom of choice
  • The beneficiary can use his or her Medi-Cal benefits and trust distributions to pay for medical services not provided by Medi-Cal, or for a specialist who does not accept Medi-Cal payments.

Avoiding Conservatorship

In addition to preserving eligibility for government assistance, a Special Needs Trust can save the beneficiary from paying for the ongoing costs and formalities of maintaining a court-supervised conservatorship.

The concept behind special needs trusts seems obvious, but their proper design and implementation is complicated. Different government assistance programs have their own sets of rules. Improperly designed special needs trusts, and other planning mistakes, may jeopardize eligibility for necessary public assistance. In addition, care requirements for your special needs loved one will change over time, as will your financial situation. For a properly designed special needs trust and effective overall special needs planning, contact us for a personal meeting.

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