A trust is an important financial tool that allows money to be given to someone indirectly through a third party. Specifically, a trust allows a grantor to appoint a trustee to manage an asset (money or property, for example) for a beneficiary. For example, a wealthy man who owns a lot of stock sets up a trust so that the stock dividends will be paid to his daughter, the beneficiary.
A California trust attorney can help set up the trust, see that the right trustee is appointed and that the money is given to the beneficiary properly. The trust is a legal document that must be properly drafted and signed to be effective.
Understanding Special Needs Trust
A Special Needs Trust (SNT) serves as a financial safety net for those with disabilities. It’s a legal and effective way to care for a physically disabled child or grandchild who will never be able to support themselves because they cannot work. The trust can be set up so that it stays in effect even after the parent or grandparent dies.
According to the California Department of Healthcare Services, a Special Needs Trust lets a person who is disabled maintain eligibility for public assistance money, even though they may be otherwise ineligible because of their assets. In California, there are two kinds of Special Needs Trusts:
- First-party SNTs are funded by parents or grandparents and include state and federal provisions to ensure that the state will be reimbursed when the beneficiary dies. They can be either an A(d)(4)(a), which applies to a disabled person under the age of sixty-five, or a Pooled SNT. The Pooled SNT can cover a disabled person of any age and is managed by an association. The funding for this usually comes from an inheritance or the settlement of a personal injury case.
- Third-party-funded SNTs do not have to reimburse the state. The funds come from a third party entirely separate from the beneficiary and can apply to anyone of any age.
This distinction between first-party and third-party Special Needs Trusts highlights the importance of strategic planning to ensure the long-term financial security and well-being of individuals with disabilities. Engaging with a knowledgeable attorney can provide invaluable guidance in choosing the right type of trust and crafting a plan that best meets the beneficiary’s unique needs. This ensures that the beneficiary continues to receive the care and support they need while maintaining eligibility for public assistance programs.
How a Trust Can Provide for a Disabled Child or Grandchild
When a child has a physical or mental condition that prevents them from working, parents are always faced with how to ensure the child is cared for when they are gone. A sibling could lose the money. A trustee is obligated to use it according to the provisions of the trust. The trustee can use the funds to pay for housing, food, caretakers, transportation, etc.
It’s important that an SNT be drafted so that Social Security or Medi-Cal benefits are not disturbed. The law in this regard is very state-specific, which makes it important for a California attorney with experience in Wills, Estates, and Trusts to draft the trust very carefully. Tax considerations will be critical. Obviously, you want to make sure your child or grandchild has the best possible quality of life. Don’t wait until the last minute. Call our office today to schedule a consultation so you can understand your options.