Better Special Needs Trusts
Special needs trusts are an important tool for protecting your loved ones with special needs. What is generally available on the market is simply not good enough. Because these trusts are so important, we provide them at no additional cost with all of our estate planning services.
These are third-party special needs trusts — the kind you set up with your own money for someone else, usually a parent planning for a child. Because the money was never the beneficiary’s, it does not count against their eligibility for SSI, Medi-Cal or other public benefits. We do not prepare first-party (self-settled or d4a) trusts, pooled trusts, or trusts funded with settlement proceeds.
How Ours Differs From the Standard
A special needs trust holds an inheritance for someone with a disability so that the money does not count as theirs and their benefits keep running. Nearly every estate planning lawyer will draft one. Here is what the usual version does, and what ours does instead.
| The standard special needs trust | A Summerall Law special needs trust | |
|---|---|---|
| What it costs | Charged separately, on top of the estate planning fee | No extra cost, including when you are using legal insurance |
| If your child never needs it | The inheritance stays in a restrictive trust anyway | The trust need not take effect; they inherit like everyone else |
| If they need oversight but not benefits | Usually the money goes straight to them, ready or not | A financial management trust can hold it with a trustee's oversight |
| Who decides which applies | Fixed when you sign, years before anyone knows | Your trustee decides for each child, at the time it matters |
| Who does the administration | The family member serving as trustee handles all of it | A professional fiduciary can administer it while your family member stays in charge as trust protector |
Why a Special Needs Trust Can Be a Great Thing
Why is this a big deal? For people with special needs who are receiving government benefits, if they receive an inheritance outside of a special needs trust, that inheritance will often result in that person no longer qualifying for benefits and this could compromise their access to housing, medical treatment, and food.
How do we fix it? Special needs trusts are an estate planning tool that allows a family member to leave money to a person with a disability without disqualifying that person from receiving government benefits. That way the person with a disability can benefit from both money and public benefits.
For example, if you leave your child $100,000 directly, with no special needs trust, and they are receiving Medi-Cal or other benefits, they will often get kicked off their benefit programs until the $100,000 has been spent (usually on uncovered medical bills). The child must then reapply for government benefits. During that time they may not be able to see their regular doctor. The $100,000 is gone and the whole process was disruptive to the child's medical treatment.
With a special needs trust, the same $100,000 is held in trust and can be used for uncovered medical expenses, education, clothes, gifts, improved housing, and other life necessities, without causing a lapse in government benefits. That way the child gets to keep their benefits and the $100,000.
Left to them directly
- Inheritance arrives
- Benefits stop, money spent down
- Benefits start again, money gone
Left to a special needs trust
- Inheritance arrives
- Benefits keep running, money available
- Nothing to reapply for
| The same $100,000 | Left to them directly | Left to a special needs trust |
|---|---|---|
| Government benefits | Often lost until the money is spent down | Continue uninterrupted |
| What the money buys | Medical bills the benefits would have covered anyway | Uncovered medical care, education, clothes, gifts, better housing |
| Their doctor | May not be able to see them during the gap | No gap, so no change in care |
| Afterwards | Must reapply for benefits, with the $100,000 gone | Nothing to reapply for, and the money is still there |
For how the benefit rules themselves work — the SSI resource limit, Medi-Cal, CalABLE accounts and what happens if money has already been received — see will an inheritance affect SSI or Medi-Cal?
When Special Needs Trusts Are Not So Great
It might be an expensive waste of time if your child gets better.
For clients who have very young children with autism, ADHD, seizure disorders, or other unpredictable conditions, it can be difficult to predict how that child will be doing in the future. Special needs trusts can be complicated to administer, expensive to establish, and restrict the beneficiary's access to money. If your child ends up not needing to preserve benefits, this can feel like an expensive waste of time.
Your child might need other forms of financial management.
If your beneficiary ends up not needing public benefits, most special needs trusts only allow for the funds to be distributed directly to the child. While many children may at some point be able to hold a job or otherwise not need public benefits, that does not always mean they are ready to handle an entire inheritance on their own. Giving them direct access to a full inheritance can be confusing, wasteful, and overwhelming.
Where a special needs trust helps
- Benefits keep running while the inheritance is available
- Pays for what benefits do not — uncovered care, education, clothes, gifts, better housing
- No spend-down, no reapplying, no gap in medical treatment
Where it can get in the way
- Complicated to administer and, at most firms, expensive to set up
- Restricts the beneficiary's access to their own money
- An expensive waste if the child never ends up needing public benefits
- Most versions only allow money to go straight to the child, whether or not they are ready
Summerall Law's Solution
We have a unique multi-tiered approach that solves the biggest problems in this type of planning:
One plan, three ways an inheritance can be delivered. Your trustee chooses for each beneficiary, at the time it matters, rather than you having to guess now.
Direct distribution
The beneficiary is well and ready to manage money. They inherit the same as everyone else.
Financial management trust
No need for public benefits, but some oversight would help. A trustee manages the money on their behalf.
Special needs trust
Public benefits need protecting. The money is held in trust so eligibility is never interrupted.
Trust Protectors
Some people use trust protectors to essentially solve disputes. We use trust protectors so that your family member can stay in charge and oversee a professional fiduciary, so that we can minimize the cost and burden of estate plans.
Administering a special needs trust is real work — keeping records, judging each distribution against the benefit rules, making filings. Families often feel they have to choose between someone who knows the beneficiary and someone who knows the rules. This way you do not have to. The professional handles the administration, and the family member keeps the authority to oversee them and to replace them if it is not working.
Choosing the family member for this role is the same decision as choosing any trustee — more on how to pick a trustee.
How Hard Is This to Set Up?
Generally, people just need to know who they trust the most in the world, and then we're enabling that person to make good choices at the time.
We include charts where you can fill in more detail about your child's care if necessary, but you don't have to do that to just get one in place.
What you decide now
Who you trust most in the world.
What the plan handles later
- Which of the three forms each beneficiary gets
- Who administers it
- Whether a professional fiduciary is brought in
- The care detail charts, if you want them
The trust is part of the estate plan rather than an add-on, so there is nothing separate to price. See flat-fee pricing.
- If your child gets better, the special needs trust does not have to have any effect — your beneficiary can receive an inheritance the same as everyone else.
- We always have the option for a financial management trust, which allows the trustee to manage funds on behalf of a beneficiary who did not need the special needs trust, but does need some financial oversight.
- We do not charge extra for special needs trusts, so it is never a waste of money. Our special needs trusts are included in our estate plans. Other firms typically charge separately for these tools. We just couldn't do it. We want you to make the right choice for protecting your family and not have to weigh in how it impacts your estate planning fee.
Case Example
No plan at all
All five inherit at once, with no one to guide them. Some lose their benefits.
A standard special needs trust
The children who turn out fine are locked in with the rest, and cannot simply take the money.
Our special needs trust
Your trustee sends each child down the route that fits them — direct distribution, a financial management trust, or a special needs trust.
Everyone slept a lot better knowing the most trusted person in their lives would be enabled to continue the love, guidance, and planning that would best enable their children to lead their lives.
Common Questions
What is a third-party special needs trust?
A third-party special needs trust is one you create with your own money for someone else — usually a parent planning for a child with a disability. Because the money was never the beneficiary’s, it does not count against their eligibility for SSI, Medi-Cal or other public benefits. It is different from a first-party trust, which holds money that already belongs to the person with a disability, such as an inheritance received outright or a lawsuit settlement.
Does Summerall Law do first-party or pooled special needs trusts?
No. We do third-party special needs trusts, which is what most families planning for a child or relative need. We do not prepare first-party (self-settled or d4a) trusts, pooled trusts, or trusts funded with settlement proceeds.
Will leaving money to my child put their benefits at risk?
It often will. If you leave your child $100,000 directly, with no special needs trust, and they are receiving Medi-Cal or other benefits, they will often get kicked off their benefit programs until the $100,000 has been spent, usually on uncovered medical bills. The child must then reapply. With a special needs trust the same $100,000 is held in trust and the benefits continue.
How much does a special needs trust cost?
Nothing extra. Special needs trusts are included in our estate plans at no additional cost, including when you are using legal insurance. Other firms typically charge separately for one.
What can special needs trust funds be spent on?
Uncovered medical expenses, education, clothes, gifts, improved housing and other life necessities — without causing a lapse in government benefits.
What happens if my child does not end up needing the trust?
Our plans are multi-tiered. If your child gets better, the special needs trust does not have to have any effect and your beneficiary can receive an inheritance the same as everyone else. There is also the option of a financial management trust, where a trustee manages funds for a beneficiary who did not need a special needs trust but does need some financial oversight.
Who should be the trustee of a special needs trust?
Usually someone who knows the beneficiary well and is trusted to make judgement calls about their care and their readiness to manage money. In our plans the trustee can decide, for each beneficiary, whether a direct distribution, a financial management trust or a special needs trust makes sense.