Special Needs Trust

A special needs trust is designed to provide benefits to a disabled or elderly individual in a manner that does not make him or her ineligible to receive government benefits such as Supplementary Security Income (SSI) or Medi-Cal.  The goal of the trust is to preserve eligibility for government assistance and provide the beneficiary with money for quality of life items that the government program does not provide. 

Eligibility for certain government assistance programs (e.g., SSI or Medi-Cal) depends upon the amount of assets or income available to a potential recipient.  If assets or income are over the low thresholds, a person is ineligible to receive public benefits.  Therefore, if you make a gift to a disabled or elderly friend or family member, you could disqualify that person from receiving government benefits.  Alternatively, the government could seize the gift as reimbursement for benefits previously supplied by the government. 

To avoid these results, many people set up a special needs trust that provides the individual with money for items that the government does not provide through the various benefit programs.  For example, with respect to an SSI recipient, a special needs trust could provide money for the recipient's recreation, entertainment and travel without affecting eligibility.  Food and shelter expenses would continue to be funded by the government program. 

In certain limited circumstances, people create special needs trusts and transfer their assets to the trust in order to become indigent and eligible for certain government benefits.  The goal is to utilize government benefits for such things as long term nursing care and food while preserving personal assets for family members.  During lifetime, the special needs trust would enhance the individual's life by paying for items the government does not provide.  At death, the remaining assets would go to the individual's family members, friends or charity.