Special Needs Planning FAQs
What is Special Needs Planning?
People with special needs typically receive government-based benefits—healthcare through Medi-Cal, and income through SSI (usually Medi-Cal and/or Social Security Income, or, SSI). These government benefits are needs-based—-that is, only people below a certain income or asset threshold can qualify. If you want to leave assets or property or an inheritance to a loved one must plan carefully, i.e., engage in special needs planning. Otherwise, any inheritance left to a special needs individual can jeopardize their eligibility for Medi-Cal or SSI. To learn more about the different special needs planning options, continue reading below.
What is a Special Needs Trust? Who Should Consider One?
A Special Needs Trust (aka a Supplemental Needs Trust) is a special type of trust, which can hold assets for a physically or mentally disabled person without jeopardizing his or her eligibility for Medi-Cal or SSI. This is because assets in a Special Needs Trust do not count as “belonging” to the recipient, for purposes of determining or preserving the recipient’s Medi-Cal and SSI eligibility. You can put almost any kind of asset into a SNT—cash, real property, stocks, parents, personal property, even life insurance proceeds. A Special Needs Trust supplements (but does not replace) the government benefits a disabled person is already receiving from Medi-Cal and/or SSI. The result is the government benefits continue to provide the person with disabilities all that it can, and the Special Needs Trust supplements the person’s individual needs. There are two main types of Special Needs Trusts: Third-Party and First Party (Third-Party Trusts are the more common).
Which Type of Special Needs Trust Do I Need?
Generally speaking, if you want to leave money or property to a loved one with special needs (such as a child, grandchild, relative, or even friend), and you might consider placing those assets into a Third-Party Special Needs Trust. If however, you yourself have special needs, and have come into a large sum of money or property (e.g., through an inheritance or lawsuit), you might consider a First-Party Special Needs. If done correctly, neither will jeopardize the recipient’s Medi-Cal or SSI statuses.
What are some of the other differences between a First-Party Special Needs Trust and a Third-Party Special Needs Trust?
What about an ABLE Account? What is that?
An ABLE (Achieving a Better Life Experience) is a savings account designed especially for people with special needs. Anyone except the person with the disability can set up an ABLE Account (the only SNT a person with disabilities himself can set up is a First-Party SNT). The money in this account will generally not “count” as belonging to the recipient for purposes of government benefit programs eligibility, as long as, (1) the account does not receive more than $15,000 a year; and (2) the account balance never exceeds $100,000.
Should I set up an ABLE Account for my child, or a Third Party Special Needs Trust?
You don’t have to choose! The ABLE Account was actually envisioned as a companion to the Third-Party Special Needs Trust. They are useful for different things. A Third-Party SNT is appropriate, for example, where an individual with SNT receives a large inheritance—for example, $100,000 or more. That money cannot go into an ABLE Account, because an ABLE Account can only receive up to $15,000 at at a time. An ABLE Account is useful for a person with special needs who, for instance, is able to work and makes a small income or small monthly stipend.