HOW DOES A SPECIAL NEEDS TRUST WORK IN CALIFORNIA?

A Special Needs Trust (SNT), also known as a Supplemental Needs Trust, is a legal arrangement designed to provide for the financial needs of individuals with disabilities while preserving their eligibility for means-tested government benefits, such as Supplemental Security Income (SSI) and Medicaid (Medi Cal in California).

Here's how a Special Needs Trust works in California:

Purpose: The primary purpose of a Special Needs Trust is to enhance the quality of life of a person with disabilities by supplementing government benefits with additional funds for expenses not covered by those benefits. These expenses may include medical and dental care not covered by Medi-Cal, education, transportation, recreation, and other items or services that improve the beneficiary's quality of life.

Trustee: A Special Needs Trust is typically managed by a trustee who has discretion to use trust funds for the benefit of the trust beneficiary. The trustee can be an individual, a professional trustee or a trust company. It's crucial to select a trustee who understands the needs of the beneficiary and has experience managing trusts.

Funding: A Special Needs Trust can be funded with various assets, such as cash, real estate, investments, life insurance proceeds, or other property. The trust can be established during the lifetime of the person with disabilities (a "third-party" SNT) or through a court order or settlement (a "first-party"or "self-settled" SNT).

Government Benefit Eligibility: Assets held in a properly drafted and administered Special Needs Trust are generally not counted when determining eligibility for means-tested government benefits, such as SSI and Medi-Cal. This allows the beneficiary to receive additional financial support without jeopardizing their eligibility for essential benefits.

Disbursement of Funds: The trustee of a Special Needs Trust has discretion to use trust funds to pay for goods and services that enhance the beneficiary"s quality of life. However, trust funds cannot be used for expenses that would be considered basic necessities and are already covered by government benefits, such as food, shelter, and utilities.

Legal Requirements: Special Needs Trusts in California must comply with state and federal laws governing trusts and government benefits. It"s essential that the trust is properly drafted and administered to meet the specific needs of the beneficiary and comply with applicable laws.

Termination of the Trust: A Special Needs Trust may terminate upon the death of the beneficiary or when the trust funds are exhausted, whichever occurs first. Upon termination, any remaining funds may be distributed to designated beneficiaries or used to reimburse the government for certain benefits provided to the beneficiary during their lifetime.

Overall, a Special Needs Trust in California provides a valuable tool for families to provide ongoing support for loved ones with disabilities while protecting their eligibility for essential government benefits.