A special needs trust, also known as a supplemental needs trust, is a legally established arrangement designed to provide for the financial needs of an individual with disabilities without disqualifying them from receiving crucial government benefits like Supplemental Security Income (SSI) and Medicaid. These benefits are often needs-based, meaning eligibility hinges on limited income and assets; a direct inheritance or large cash gift could jeopardize access to these vital services. Approximately 1 in 4 adults in the United States live with a disability, highlighting the significant need for careful estate planning that considers these unique circumstances. A properly structured special needs trust allows individuals to enjoy assets and improved quality of life without facing the devastating loss of essential support.
What assets can go into a special needs trust?
A wide range of assets can be used to fund a special needs trust, including cash, stocks, bonds, real estate, and life insurance policies. It’s important to note that the trust must be carefully drafted to avoid being considered a “grantor trust” for tax purposes, which could negate the benefits. According to the Social Security Administration, in 2023, over 8.5 million people received SSI benefits, with an average monthly payment of around $683. This underscores the importance of protecting eligibility for these funds. The trust document should clearly specify how funds are to be used, prioritizing supplemental needs—things *beyond* what government programs already cover, such as recreation, travel, hobbies, specialized therapies, and personal care items. It can also include provisions for managing long-term care costs not covered by Medicaid.
How does a special needs trust differ from a traditional trust?
The key difference lies in the *purpose* and *restrictions* on distributions. A traditional trust aims to benefit the recipient directly, providing income and assets for their general well-being. However, distributions from a special needs trust *cannot* be used to cover expenses that would otherwise be paid for by government benefits. This is crucial. For example, a traditional trust could pay for housing and food, but a special needs trust can only provide for things *beyond* those basic needs. “We often explain it to clients as creating a ‘supplemental’ lifestyle, not a replacement for public assistance,” says Steve Bliss, an Estate Planning Attorney in Wildomar. A common mistake is funding a trust with the intention of covering all living expenses, which immediately disqualifies the beneficiary from vital programs.
I remember Mrs. Davison, she was devastated when her son lost benefits…
Old Man Hemlock adjusted his glasses and leaned forward, recalling a difficult case. “Mrs. Davison, a sweet woman, left a significant inheritance to her adult son, Michael, who had Down syndrome. She hadn’t consulted with an attorney specializing in special needs planning. Michael immediately lost his SSI and Medicaid benefits because the inheritance exceeded the allowable asset limits. He was suddenly facing exorbitant medical bills and the potential loss of his group home placement. It was a heartbreaking situation. We scrambled to unwind the inheritance, establishing a special needs trust to protect future assets, but it was a costly and stressful process for everyone involved.” It highlighted the critical need for proactive planning and expert legal guidance. Approximately 65% of individuals with disabilities rely on government assistance for some portion of their care, making the potential loss of benefits particularly devastating.
But then there was young Leo, everything worked out beautifully…
“Thankfully, we’ve also had many success stories,” Old Man Hemlock continued, a smile returning to his face. “Leo’s parents, anticipating his future needs, came to us years ago. They established a special needs trust, funded with life insurance and regular contributions. After a childhood accident left Leo with significant physical challenges, the trust provided him with specialized therapies, adaptive equipment, and funding for recreational activities. Because the trust was properly structured, Leo remained eligible for SSI and Medicaid, ensuring he received the comprehensive care he needed. He’s now thriving, participating in sports, pursuing his education, and living a full and meaningful life. It was a testament to the power of thoughtful planning and the importance of protecting vulnerable individuals.” This is why Steve Bliss focuses on not just creating trusts, but on ensuring they truly serve the long-term well-being of his clients and their loved ones.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- estate planning
- pet trust
- wills
- family trust
- estate planning attorney near me
- living trust
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “Can I use estate planning to protect assets from creditors?” Or “Are retirement accounts subject to probate?” or “Does a living trust save money on estate taxes? and even: “What is the difference between Chapter 7 and Chapter 13 bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.