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Horizon Elder Law & Estate Planning Blog

Monday, December 30, 2024

Using Special Needs Trusts to Avoid Conservatorship for Disabled Beneficiaries

Planning for the long-term care of a disabled loved one is a complex process, and one of the most important considerations is ensuring they have the resources they need without sacrificing their independence. 

A Special Needs Trust (SNT) is a powerful tool that can help disabled beneficiaries maintain their quality of life without the need for conservatorship—a court-appointed arrangement where another individual makes financial or personal decisions on behalf of the disabled person. By using a Special Needs Trust, families can protect their loved one’s assets, ensure they receive the care they need, and avoid the burdens and limitations of conservatorship.

If you are the parent or guardian of such a disabled individual, our California estate planning attorney can help. 

Financial Means Testing for Government Assistance

Disabled individuals struggle with managing their finances and planning for life. A special needs trust serves the purpose of setting money aside for such an individual without impacting government benefit eligibility.

Special needs trusts are designed for the positioning of assets for those receiving government benefits and safeguarding continuing eligibility for those benefits. Government payments to the disabled in the form of Medicaid and Supplemental Security Income (SSI) are distributed after financial means tests. One’s eligibility for those benefits hinges on his or her assets and income.

If one’s savings exceed the limit after receiving an influx of cash, such as a cash gift or inheritance, he or she might be disqualified from supplemental security income. Moreover, that individual might also be denied additional government benefits that are means-tested. 

The Utility of a Special Needs Trust

Special needs trusts serve an important role as they are not counted toward a beneficiary’s assets when reviewing government benefit eligibility. The trusts place specific restrictions on asset use within the special needs trust. Such restrictions are assets within the special needs trust, meaning they are not viewed as countable assets. 

The catch is that access to the assets placed within a special needs trust is limited. The government does not consider such assets to be countable for gauging eligibility for benefits.

Special needs individuals set to receive money through inheritance or a trust distribution are advised to delay the payment. Delaying the transfer of the gift until a special needs trust is established allows the trustee or executor to transmit the assets to the trust. 

Alternatively, if there were a conservatorship in place, the conservator would have to notify the court of the pending inheritance or distribution. The conservator would also have to obtain permission from the court to establish the special needs trust for that individual with special needs.

First Party Vs. Third-Party Special Needs Trusts

Third-party special needs trusts are the most common type of special needs trust. A relative or parent puts a portion of his or her money into a special needs trust for the individual in question. 

First-party special needs trusts are irrevocable trusts in which the special needs person uses his or her assets to establish the trust. Such a trust is typically established when the person suffers an injury and needs to put assets into the special needs trust to qualify for government benefits.

Learn More During a Consultation With Our California Estate Planning Attorneys

Special needs trusts and trusts as a whole are important legal tools that help families like yours plan for the future. You can learn more about trusts during a consultation with an experienced estate planning attorney in California. Contact us for a consultation today.


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