A trust is an incredibly useful estate planning tool for many Californians. While there are many different types of trusts, one of the main purposes of a trust is to have a separate owner for assets that are placed (funded) into the trust. The trustee manages the assets in the trust and distributes them to beneficiaries as laid out in the trust’s instructions.
A commonly used trust in the U.S. is a special needs or supplemental needs trust. This type is used so disabled individuals can receive inheritances from loved ones without jeopardizing their eligibility for certain government benefits like Supplemental Security Income (SSI) and Medicaid/Medi-Cal.
SSI and Medicaid are means-tested government benefits. In other words, the government will evaluate an individual’s means and determine whether that individual has too much money to justify giving him or her public benefits. Most disabled individuals receive government benefits because they do not earn more than a certain amount of money—if they work at all. A large inheritance received by a special-needs or disabled individual through a Last Will and Testament could change things.
Example of a Special Needs Trust
Let’s say Sam receives SSI and is on Medi-Cal because of an intellectual disability. Sam does not work and lives close to two of his three siblings who help care for him. Sam’s mother, who is the only surviving parent, decides to leave him $50,000 in her Will. Once Sam’s mother passes away, that $50,000 goes into Sam’s bank account as soon as the probate process is complete. The next time Sam is required to fill out forms to keep receiving SSI and Medi-Cal, the amount in his bank account exceeds the eligibility threshold, leaving him without government benefits.
This situation could have been avoided if Sam’s mother had created a special needs trust and funded it with the $50,000. She could name either one of Sam’s siblings as the trustee to manage the money after she passes away. The trustee could then distribute the money to Sam in a methodical way so as not to threaten Sam’s eligibility for government benefits.
Your Attorney Should Be on Your Estate Planning Journey
There are plenty of websites that offer do-it-yourself legal services, and estate planning is a prominent legal area for these DIY forms. The problem with these forms is that you can’t be sure how one action you take regarding your estate plan will affect other parts of your estate. That can only be determined after a thorough assessment of your financial situation and your overarching goals.
Anthoor Law Group, a Bay Area law firm, serves a diverse client base needing estate planning help. Our compassionate and friendly staff is looking forward to discussing your legal needs with you today. Call us at (510) 794-2887 to set up a consultation.
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