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Special Needs Planning and Supplemental Needs Trusts

Download Article: 10 Costly Mistakes to Avoid When Planning for Your Special Needs Child
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If you currently provide care for a child or other loved one with special needs (such as mental or physical disabilities), you must have contemplated with concern about what may happen to them when you are no longer able to provide and care for them. 

While you can certainly provide that they receive money and assets from your estate when you die, such a bequest may actually prevent them from qualifying for essential benefits under various government benefit programs, such as Supplemental Security Income (SSI), Medi-Cal (the Medicaid program in California), Section 8 housing through Housing and Urban Development (HUD), and others.  In fact, someone already receiving those benefits could see them lost if a gift or inheritance are received in the wrong way.

Public benefits such as those mentioned above only provide for the bare necessities of life such as food, housing, clothing, and medical care. As you can imagine, these limited benefits will not provide those loved ones with the resources that would allow them to enjoy a richer quality of life.  As noted above, if you leave any property to your special needs child or other loved one who is receiving public benefits, you run the risk of disqualifying the person from receiving that assistance.

Fortunately, the government has established rules allowing assets to be held in trust, called a “Special Needs” or “Supplemental Needs” Trust for a recipient of SSI, Medi-Cal, and other government benefits.   These trusts are subject to certain very specific rules in how they are created and how they are administered in order to avoid a lose of benefits.

My law firm can help you set up a Supplemental Needs Trust so that eligibility for government benefits is preserved, while at the same time providing assets that will meet the supplemental needs of your disabled child or other love one.  The Supplemental Needs Trust can fund those additional needs beyond food, clothing, shelter and medical care.  In fact, the Supplemental Needs Trust must be designed specifically to supplement public benefits and not replace them.

Parents should be aware that funds from a Supplement Needs Trust cannot be distributed directly to a disabled child or other loved one.  Instead, the funds must be disbursed to third parties who provide goods and services for use and enjoyment by the child or love one.

The Supplemental Needs Trust can be used for a variety of life-enhancing expenditures without compromising your loved one's eligibility for benefits.  Some uses are: 

  • Annual check-ups at an independent medical facility

  • Attendance at religious services

  • Supplemental education and tutoring  

  • Out-of-pocket medical and dental expenses

  • Transportation (including purchase of a vehicle)

  • Maintenance of vehicles

  • Purchase materials for a hobby or recreation activity

  • Funds for trips or vacations

  • Funds for entertainment such as movies, shows or ballgames.  

  • Purchase of goods and services that add pleasure and quality to life: computers, videos, furniture, or electronics.

  • Athletic training or competitions

  • Special dietary needs

  • Personal care attendant or escort

Supplemental Needs Trusts are a critical component of your estate planning if you have disabled beneficiaries for whom you wish to provide after your passing.

To avoid confusion in dealing with various government agencies that administer benefits for those who are disabled, the Supplemental Needs Trust should be a trust that is created separate and distinct from your  revocable living trust and other estate planning.   Supplemental Needs Trusts are often "funded" with a separate asset such as a life insurance policy.  Your revocable living trust can also direct some of your estate into the Supplemental Needs Trust at your death.

I am as close as your telephone, fax, or e-mail, when it comes to scheduling a free one-hour initial consultation.   I am generally available during office hours, and usually can return after-hours calls, faxes and emails by the next business day.



Attorney Robert P. Bergman, Board Certified Specialist in Estate Planning, Trust and Probate Law, assists families in the San Francisco Bay Area with Estate Planning, Special Needs Planning for children and adults, special planning for retirement plan assets, and trust administration.

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