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Establishing a Special Needs Trust


Although it may be uncomfortable to think about, estate planning is actually one of the best ways to ensure that our wishes are carried out after we pass away. How an estate is set up is largely determined by a person’s specific circumstances. For instance, many people choose to create Special Needs Trusts (SNTs), which help ensure that disabled loved ones can maintain their eligibility for public assistance even if those individuals have assets that would otherwise make them ineligible for benefits. To determine whether this type of trust is right for you and your family, please contact an experienced special needs trust attorney who can advise you.

What are Special Needs Trusts?

Under federal law, individuals with disabilities who own a certain amount of property become ineligible for specific government benefits. Special needs trusts allow these individuals to avoid becoming ineligible for benefits, as the trust, and not the individual him or herself actually owns the property. In most cases, testators decide to establish this type of trust for a loved one in their estate plans. Upon that individual’s death, the trustee of the trust will be able to use the funds to financially support the beneficiary.

First Party SNTs

There are two types of special needs trusts: first party funded SNTs and third party funded SNTs. First party SNTs are funded with property that belongs to the beneficiary or to which the beneficiary is legally entitled, such as an insurance settlement, personal injury award, or inheritance.

First party SNTs are further broken down into two groups: pooled SNTs and (d)(4) SNTs. The former can be established for disabled individuals of any age, as long as they are managed by a non-profit association. The name is derived from the fact that while separate accounts are maintained for each beneficiary, the funds are pooled together for investing. A (d)(4) SNT, on the other hand, can only be created for a disabled individual who is under the age of 65 years old.

Regardless of the type of special needs trust, the Department of Health Care Services (DHCS) is  entitled to recover an amount equal to that paid in medical assistance by Medi-Cal on the beneficiary’s behalf after that individual’s death or upon termination of the trust.

Third Party SNTs

Third party special needs trusts are funded not with a beneficiary’s own assets, but with property belonging to a third party. Unlike first party SNTs, any funds remaining in third party trusts are not recoverable by the DHCS. Third party SNTs also differ from first-party versions in that the trustee can designate other beneficiaries, making it a valuable tool for those who want to protect the primary beneficiary, but also control where the remainder of the assets are distributed upon that individual’s death or upon termination of the trust.

Contact an Experienced Special Needs Trust Lawyer for Help with Your Case

If you are considering creating a special needs trust for a loved one, please call 925-283-6691 to speak with a Walnut Creek special needs estate planning attorney at the Feldman Law Group today to learn more about your legal options.




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