If you are a California resident who has a special needs child, you will want to ensure that they’re taken care of for their entire life. One way to do that is through a special needs trust. You should know how you can establish that trust and how it works.
What is a special needs trust?
There are a variety of trusts you can create to set aside money for your loved ones. A special needs trust is a legal agreement that allows a person with a physical or mental disability or someone who has a chronic illness to receive money without compromising their ability to claim Social Security benefits, Medicaid, Medicare or Supplemental Security Income. It is a fiduciary relationship that allows a person or entity to manage assets that benefit the recipient of the trust.
A special needs trust is a good option for individuals who might otherwise lose eligibility for those programs that require their income to stay below a certain amount. For instance, to qualify for Medicaid, it may be necessary for the amount of money the person has in the bank to be no higher than $10,000.
How does a special needs trust work?
Special needs trusts are good for covering the cost of the recipient’s financial needs that aren’t covered by public assistance. What’s in the trust doesn’t count against that assistance if it isn’t used for things such as food and shelter. In most cases, the funds from the trust pay for medical expenses, transportation, caretakers and more.
The person who establishes the trust chooses a trustee who will manage it on behalf of the special needs person. The trustee sees how the finances are distributed and managed. Sometimes, special needs trusts are also known as supplemental needs trusts.
What are the benefits of special needs trusts?
Special needs trusts have certain benefits for both the person who is named in the trust and the person who establishes the trust. The beneficiary can have financial support and not compromise their eligibility for a variety of programs that require income to be at a certain limit. The individual who creates the trust can enjoy peace of mind that the beneficiary will be taken care of financially.