This is a question that comes up regularly. When a loved one has a disability, making sure they’re taken care of is even more critical than usual.
In most cases, the special needs trust is used to make sure a disabled person does not lose government benefits, such as SSI (Supplemental Security Income) or Medi-Cal. Since these programs are needs-based, the recipient must have less than $2000 to his or her name in order to be eligible. Even a small inheritance could cause them to lose those benefits. There is also the issue of whether the person is capable of managing his or her own finances, and whether he or she may need ongoing care. These are all good reasons to have a special needs trust.
When creating a special needs trust, there are some additional questions to keep in mind:
- Should this trust be separate from your revocable trust? If you want to start putting money into the trust immediately, or if there’s a third party, such as a grandparent, that wants to put money into it, then you may want to make this trust a separate, stand-alone document. If you intend to fund it with the inheritance the disabled person will receive on your death, then it may be better to have it as part of your revocable trust.
- Who will serve as trustee? It may be the same person you choose for your revocable trust, or it may not. This trust will (hopefully) last a very long time, so this person will be managing the trust and making payments for a very long time as well. It’s more of a commitment than a standard revocable trust, which typically takes 1-2 years to administer. This person should also have some knowledge of public benefit laws, so they don’t make a mistake that would disadvantage the disabled person. You may want to consider hiring a professional that specializes in these kinds of trusts.
- Do you want someone to oversee the trustee? Since a person’s welfare is involved, it would be a good idea to have one or more people who are monitoring the trustee and making sure the disabled person’s needs are being met. This would be a good position for family members who care about the disabled person and want to be involved, but don’t want (or aren’t suited for) the responsibilities of being a trustee.
- Where will the person live after you’re gone? If the disabled person needs a lot of care, it’s very likely they will be placed in a care facility after you’re gone. At the very least, they’ll likely be moving to the home of the new caregiver. Moving is often a traumatic experience for these individuals, and moving them while they’re still grieving makes it even more traumatic. Consider making the transition while you’re still alive, or setting up a plan so that when the time comes, they’re not experiencing two disruptive events in a short time period.
- If there’s still money in the special needs trust after the disabled person dies, where shall it go? Ideally, there will be enough money in the special needs trust that, no matter how long the disabled person lives, there will still be some left over after they go. You should give some thought as to where you want that money to go after the disabled person is gone. If the disabled person is high-functioning, you could also add language that would let them decide, in case they have a preference.
These are just a few of the things to think about when considering a special needs trust. If you have questions about these, or would like to discuss if a special needs trust would be right for you, please contact me at kaway@kawaylaw.com.