Why Choose Law Offices of Rozsa Gyene for Special Needs Trusts?
What is a Special Needs Trust?
A Special Needs Trust is a powerful legal tool that can help protect the financial interests of a child with special needs.
One of the main benefits of a special needs trust is that it allows parents or caregivers to access money now to care for a child with special needs, without affecting the child's eligibility for Medicaid and other government benefits in the future. There may be a variety of tools available to help you meet your estate planning needs and to protect the interests of your child.
A common concern for parents of a child with special needs is to ensure that their child receives his or her inheritance without compromising his or her eligibility for government benefits.
We guide you through specific strategies to protect your child's financial interests now and in the future.
Protecting Those Who Need It Most
Every family with a special needs loved one faces unique challenges and concerns. You want to provide the best possible care and support, both now and in the future, without jeopardizing vital government benefits.
A Special Needs Trust bridges this gap, allowing you to enhance your loved one's quality of life while preserving their eligibility for essential programs. It's not just about money – it's about dignity, independence, and ensuring your child has the resources they need throughout their lifetime.
Benefits of a Special Needs Trust
Preserve Government Benefits
Maintain eligibility for crucial programs like Medicaid, SSI, and other government assistance while still providing additional support.
Supplement Basic Needs
Provide funds for quality of life improvements that government benefits don't cover - therapy, education, recreation, and personal care.
Housing & Care Options
Ensure your loved one has access to appropriate housing, caregiving, and support services throughout their lifetime.
Family Peace of Mind
Know that your child will be cared for even when you're no longer able to provide support yourself.
Legal Protection
Assets in the trust are protected from creditors and cannot be considered when determining benefit eligibility.
Customized Care
Tailor the trust to your child's specific needs, abilities, and circumstances for personalized support.
Understanding Special Needs Trusts in California
A Special Needs Trust (also called a Supplemental Needs Trust) is a legal arrangement that allows individuals with disabilities to receive financial support without losing eligibility for essential government benefits like Supplemental Security Income (SSI), Medicaid (Medi-Cal in California), and other needs-based programs.
Without a Special Needs Trust, an inheritance or lawsuit settlement could disqualify a disabled person from receiving the government benefits they depend on for basic living expenses and medical care. The trust serves as a safety net, providing extras that improve quality of life while preserving access to crucial public assistance. In California, where government benefit programs play a vital role in supporting individuals with disabilities, proper trust planning is essential for maintaining financial security and quality care throughout the beneficiary's lifetime.
Types of Special Needs Trusts
Third-Party Special Needs Trust
Most common type. Funded by parents, grandparents, or other family members with their own assets. Created as part of estate planning to provide for a disabled loved one after the creator passes away.
Key advantage: No Medicaid payback requirement upon beneficiary's death - remaining funds can pass to other family members.
First-Party (Self-Settled) Special Needs Trust
Funded with the disabled person's own assets - typically from a personal injury settlement, inheritance, or back pay from Social Security. Must be established before beneficiary turns 65.
Important limitation: Upon death, state must be repaid for Medicaid services provided during beneficiary's lifetime (Medicaid payback provision).
Pooled Trust (d4C Trust)
Managed by nonprofit organizations that pool funds from multiple beneficiaries for investment purposes while maintaining separate accounts. Good option when family cannot serve as trustee or trust amount is relatively small (under $250,000).
Government Benefits Protected by Special Needs Trusts
Properly structured Special Needs Trusts preserve eligibility for these critical programs:
Supplemental Security Income (SSI)
Monthly cash assistance for disabled individuals with limited income and assets (asset limit: $2,000 individual, $3,000 couple)
Medi-Cal (Medicaid)
California's health coverage for low-income individuals, covering medical care, prescriptions, therapy, and long-term care
HUD Section 8 Housing
Federal housing assistance program providing affordable housing vouchers
SNAP (Food Stamps)
Supplemental Nutrition Assistance Program for food purchasing assistance
What Can a Special Needs Trust Pay For?
Allowed Expenses (Will NOT Affect Benefits):
Prohibited Expenses (Will Reduce or Eliminate Benefits):
- Cash given directly to beneficiary - Counts as income, reduces SSI dollar-for-dollar
- Food and groceries - Reduces SSI by up to one-third
- Mortgage or rent payments - Counts as "in-kind support," reduces SSI by up to one-third
- Utilities (electric, gas, water, sewer) - Reduces SSI
- Paying off debts owed by the beneficiary
Choosing the Right Trustee
The trustee manages trust assets and makes distribution decisions - one of the most important choices in creating a Special Needs Trust:
Family Member
Sibling, relative, or close friend who knows beneficiary well. Free but requires financial knowledge and time commitment.
Professional Fiduciary
Licensed professional specializing in trust management. Charges fees (typically 1-2% annually) but provides expertise and continuity.
Co-Trustees
Combination of family member (who knows beneficiary) and professional (who handles finances). Best of both worlds.
Important: The beneficiary (person with disabilities) should NOT be trustee, as this could jeopardize their benefit eligibility under federal and state rules.
What Does a Special Needs Trust Cost?
Attorney fees for drafting trust document, coordinating with benefits specialist, and ensuring compliance with federal and state regulations.
Professional trustee fees (1-2% of assets annually), tax preparation ($500-$1,500/year), accounting services. Family trustees often serve without fee.
ABLE Accounts vs. Special Needs Trusts
ABLE (Achieving a Better Life Experience) accounts are tax-advantaged savings accounts for individuals with disabilities. While similar to Special Needs Trusts, they have important differences:
Strategy: Many families use both - ABLE account for smaller, flexible expenses and Special Needs Trust for larger assets and long-term planning.
How to Fund a Special Needs Trust
Special Needs Trusts can be funded through various sources during your lifetime or after your death:
Common Funding Sources:
- Life Insurance: Name the trust as beneficiary of your life insurance policy - provides instant funding upon your death
- Your Will: Leave specific assets or percentage of estate to the trust (testamentary trust)
- Your Living Trust: Direct portion of your revocable living trust assets to fund Special Needs Trust
- Retirement Accounts: Name trust as beneficiary of IRA or 401(k) (requires special drafting for "see-through" trust treatment)
- Direct Gifts: Family members can gift money directly to third-party trusts during lifetime (subject to gift tax limits)
- Lawsuit Settlements: Personal injury settlements for disabled person transferred to first-party trust
- Inheritance: If disabled person inherits money, redirect to first-party Special Needs Trust within 9 months
Common Mistakes to Avoid
Leaving Assets Directly to Disabled Person
Inheritances, life insurance, or gifts given directly will disqualify them from SSI and Medicaid. Always direct assets to the Special Needs Trust instead.
Using Generic "Support" Trust Language
Trust must use specific "supplemental and extra care" language, not provide for basic support. Incorrect wording can defeat the entire purpose.
Naming Beneficiary as Trustee
If the disabled person controls the trust, assets count as theirs for benefit eligibility purposes. An independent trustee is essential.
Using DIY or Online Templates
Special Needs Trust rules are complex and strictly enforced. Small errors can result in loss of benefits worth thousands per month. Professional drafting is essential.
When to Review and Update Your Trust
Special Needs Trusts should be reviewed and potentially updated when major life changes occur or laws change:
- Change in beneficiary's condition - Improvement or decline in disability status may affect benefit eligibility
- Change in government benefit programs - SSI or Medicaid rules change periodically and may require trust modifications
- Trustee change - Original trustee passes away, resigns, or becomes unable to serve
- Tax law changes - Federal or state tax laws affecting trust administration change
- Change in family circumstances - Divorce, remarriage, birth of other children, or death of family members
- Moving to another state - Different states have different rules about Special Needs Trusts and benefit eligibility
- Significant asset growth - Trust assets have grown substantially, requiring different investment or management strategy
We recommend reviewing your Special Needs Trust at least every 3-5 years with an experienced estate planning attorney to ensure it continues to meet your loved one's needs and complies with current regulations.
Protect Your Loved One's Future & Benefits
Don't risk losing crucial government benefits. Let us create a Special Needs Trust that provides for your loved one while preserving their eligibility.
Call (818) 291-6217How We Create Your Special Needs Trust
Consultation
We discuss your child's specific needs and current benefit situation
Planning
Design a trust structure that protects benefits while maximizing support
Drafting
Create legally sound documents that comply with all regulations
Implementation
Execute the trust and ensure proper funding and management
Frequently Asked Questions
Protect Your Child's Future Today
Don't wait to secure your loved one's financial future and government benefits
Book An AppointmentDraft your Trust over the phone with an Attorney:
(818) 291-6217Does Your Child Need a Special Needs Trust?
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