What is a Special Needs Trust? How does a Special Needs Trust work?

What is a Special Needs Trust?

A Special Needs Trust (SNT) is a device or documents that have a purpose to separate assets from a certain individual who’s the beneficiary.

The purpose of a Special Needs Trust is usually to preserve government benefits. For example, let’s say you have a developmentally disabled child and they have special education or physical needs and they are on Medi-Cal, Medicare, Social Security, Disability, or some kind of public benefit program that provides their medical care. If that beneficiary or person receives a lot of assets then they lose the government benefits entirely and they are required to use their resources until they’ve been completely used. Once all their resources have been used they can go back to the governmental agency and reapply for those government benefits that were previously enjoyed.

The purpose of a SNT is to have the money stay in the trust not under the control of the beneficiary but under a third party.

In order for it to work a third-party must create the trust and be the grantor. The beneficiary cannot create this type of trust for themselves because that would be considered a first party trust. In order to be a SNT a third party has to create it and it has to allow for discretionary distributions to the beneficiary. You cannot make it a fixed amount like ten thousand a month has to be paid from this trust that would remove or disconnect the public benefits received. A third-party creates an independent trustee and discretionary distributions are the key essential factors for a SNT. Depending on the type of governmental benefit being received various clauses would need to go into the trust in order for it to be managed properly.

Here is an example
Let’s say a child was injured in an auto accident and awarded a 5 million-dollar settlement. That money is put in a SNT account and it’s kept separate from the beneficiary. If the beneficiary is given a large sum of money now then they lose their government benefits.

Other benefits
One of the expenses that can be provided to a beneficiary is the trust can buy a house or a condo for the beneficiary and it’s in the name of the SNT and that does not cause a loss of government benefits. When you’re talking about a SNT the beneficiary/beneficiaries usually have significant problems maintaining the normal daily living maintenance. Sometimes it is used for people that have chemical dependency or other types of medical problems that cause them to need public benefits and not have assets on their own.
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Have questions about a Special Needs Trust?

Call the office of Rex Crandell Firm in Walnut Creek, CA

Rex L. Crandell Firm
Walnut Creek Office
3000 Citrus Circle Suite 207
Mail: P O Box 30305
Walnut Creek, CA. 94598
(925) 934-6320
(800) 464-6595
E-Mail: rexcrandell@astound.net
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