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Estate Planning Concerns for Disabled Beneficiaries

There are millions of people in this country who have mental or physical disabilities. In many cases individuals with disabilities are receiving government benefits and assistance such as supplemental security income (SSI) or Medi-Cal (which is the California version of Medicaid). If such an individual is receiving such benefits and receives money from another source such as from an inheritance, those government benefits may be in jeopardy. In all cases, the goal is to protect the beneficiary’s continued access to need-based government benefits.

If a member of your family or someone you contemplate leaving assets to when you die is disabled, you should consider what is called a Special Needs Trust. A special needs trust is one that is set up for the benefit of a beneficiary so that if that beneficiary is, or at some point might be, receiving public assistance such as SSI or Medi Cal, they can receive the assets in trust and not be disqualified from receiving benefits. The provisions of the special needs trust allow a trustee to make distributions to the beneficiary for special or supplemental needs such as medical care and dental care not covered by their benefits, plastic surgery or alternative type medical treatment, physical therapy, massages, etc. It also can be used to pay for computers, books, recreation, travel, and handicapped-equipped vehicles. It is important that the trustee adhere to certain standards for maintaining the trust and investing the trust assets. The trustee needs to be aware that the assets of the trust can only be used to purchase supplemental items or services which are not covered by public benefits.

A special needs trust may be set up as a “stand-alone trust” or as a subtrust in another trust. If you have children who are disabled, you can provide in either manner that their inheritance not be given to them outright but pass into the special needs trust. Once the trust is set up, grandparents or other relatives can provide in their own trust that such a beneficiary’s inheritance goes to that special needs trust. Other blogs and articles have emphasized how important it is to create an estate plan. It is just as important that you have a properly drafted special needs trust if you have disabled beneficiaries. Scott C. Soady, A Professional Corporation can help you with an estate plan that will include a special needs trust. Our initial consultation is complimentary.

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