Planning for the future of a loved one with special needs requires thoughtful preparation. One of the biggest concerns families face is how to provide financial support without jeopardizing access to essential benefits like Medi-Cal or Supplemental Security Income (SSI). That’s where a Special Needs Trust (SNT) comes in—a powerful tool that ensures your loved one is cared for, without putting their government assistance at risk. Think of it as a financial superhero cape—minus the spandex.

Who Can Benefit from a Special Needs Trust?

A Special Needs Trust is designed to help individuals with physical, mental, or developmental disabilities maintain financial security while preserving eligibility for public benefits. Here’s who might need one:

• Individuals with Disabilities: If someone you love has a disability that limits their ability to work or requires long-term care, an SNT can help protect their financial future.
• Recipients of Government Assistance: Many benefit programs, like SSI and Medi-Cal, have strict income and asset limits. An SNT allows individuals to receive financial support without disqualifying them from these critical programs.
• Minors and Adults: Whether you’re planning for a child’s long-term care or an adult who becomes disabled later in life, an SNT can provide peace of mind at any stage.

Recognizing the need for an SNT is the first step in ensuring your loved one has the resources they need to lead a fulfilling life. Plus, setting one up now can help you avoid a future “oops” moment when you realize a well-intended financial gift just cost them their benefits.

Types of Special Needs Trusts

Not all Special Needs Trusts are the same. The right choice depends on who is funding the trust and how it will be managed:

• First-Party SNTs: Funded with assets that belong to the beneficiary, such as an inheritance, legal settlement, or personal savings. This type of trust ensures they remain eligible for government benefits. However, it comes with a catch—the government has the right to be reimbursed from the remaining funds after the beneficiary’s passing for any Medi-Cal benefits paid on their behalf.
• Third-Party SNTs: Created and funded by someone other than the beneficiary—often a parent or family member—as part of an estate plan. This type of trust is particularly beneficial because it does not require a government payback provision, meaning any remaining funds can be passed on to other family members or charities rather than reimbursing Medi-Cal. (Pro tip: Don’t leave money directly to your child with special needs in your estate plan—put it in an SNT instead!)
• Pooled Trusts: Managed by a nonprofit organization, these trusts combine the assets of multiple beneficiaries while keeping individual accounts separate. Kind of like a group project, but without the stress of someone not pulling their weight. Pooled trusts can be a great option for individuals who don’t have a suitable trustee or for smaller amounts of money that wouldn’t justify setting up a standalone trust. They are available to both first-party and third-party beneficiaries and still provide professional management and oversight.

Why a Special Needs Trust is Critical in Estate Planning

Incorporating an SNT into your estate plan ensures that your loved one is supported financially in a way that enhances their quality of life while preserving their access to necessary government programs.

• Asset Management: Funds in an SNT are managed by a trustee, who ensures they are used appropriately to benefit the individual.
• Supplemental Support: An SNT can cover costs that government benefits don’t, such as education, recreation, travel, and personal care. Because let’s be honest—life should be about more than just covering the bare minimum.

Why Not Just Leave Money to a Sibling Without a Disability?

Some families consider leaving an inheritance for a child with special needs by simply giving the money to a sibling without a disability, expecting them to “take care of” their sibling. While this may seem like a simple solution, it comes with significant risks:

• Loss of Control: The sibling legally owns the money and is under no obligation to use it for their disabled sibling’s needs.
• Financial & Legal Risks: If the sibling goes through a divorce, bankruptcy, or lawsuit, those funds could be lost entirely.
• Eligibility Issues: If the sibling passes away unexpectedly without a proper plan, those funds might not end up where you intended.

A Special Needs Trust protects these assets and ensures they are used solely for the benefit of your loved one with special needs, without unnecessary risk.

Key Considerations When Setting Up a Special Needs Trust

Before establishing an SNT, keep these factors in mind:

• Long-Term Needs Assessment: Consider your loved one’s lifetime needs, including healthcare, housing, and quality of life. A little planning now can prevent future headaches (and legal tangles).
• Choosing the Right Trustee: A trustee is responsible for managing the trust. Whether you choose a family member, professional fiduciary, or nonprofit organization, make sure they are trustworthy, knowledgeable, and not likely to make impulsive investments in Bitcoin.
• Legal and Financial Guidance: Working with an experienced estate planning attorney ensures your SNT is structured properly and complies with legal requirements. (And yes, we can help with that!)

Secure Your Loved One’s Future Today

A Special Needs Trust is one of the most effective ways to provide long-term financial security for a loved one with disabilities. It ensures they have the resources they need while maintaining access to essential benefits.

If you’re ready to take the next step in planning for your loved one’s future, contact us today to get started. Let’s make sure their future is secure—no spandex required.