Special Needs Trusts

1. What Are Special Needs?

Any person, regardless of age, may become temporarily or permanently incapacitated due to a medical condition or personal injury, resulting in that person becoming either totally or partially unable to care for his or her finances and/or personal care. Mental illness is an example of such a medical condition.

Under California’s Probate Code § 3604 (b)(1) a person with a disability which
substantially impairs the person’s ability to provide for his or her own care or custody is a person with a substantial handicap.

California is unique within the United States to provide an “entitlement” of statewide services to developmentally disabled persons. There are 21 regional centers in the state of California, 7 withing Southern California. Welfare & Institutions Code § 4648 provides that “In order to achieve the stated objectives of a consumer's individual program plan, “IPP”, the regional center shall secure services and supports that meet the needs of the consumer, as determined in the consumer's individual program plan, and within the context of the individual program plan, the planning team shall give highest preference to those services and supports which would allow minors with developmental disabilities to live with their families, adult persons with developmental disabilities to live as independently as possible in the community, and that allow all consumers to interact with persons without disabilities in positive, meaningful ways.

Under California’s Welfare & Institutions Code § 4512, Regional Centers follow a more restrictive definition of special needs, and require the onset of a severe developmentally disabling condition, prior to the age of 18 years, such as mental retardation, cerebral palsy, autism or any other condition necessitating services similar to those for a mentally retarded person.

2. Government Benefits:

Any person who has a substantial handicapping condition which will last more than 6 months or which is permanent, who cannot maintain substantial gainful employment due to such condition, and who does not have more than $2,000.00 in non-exempt assets, is eligible to receive Supplemental Security Income, (SSI), under Title XVI, 42 USC 1381-1383; and medical insurance, (Medi-Cal) benefits, under Title XIX, 42 USC 1396-1396v, as long as he or she remains eligible for them.

People with special needs have lifetime intellectual and developmental limitations, and sometimes chronic medical conditions. They may be unemployable except in sheltered settings, and if employed, may be able to earn only limited wages, without benefit of medical insurance.

Most people with special needs rely upon governmental benefits such as SSI and Medi-Cal, as their sole means of medical insurance and financial support. In order to qualify for such benefits the Social Security Administration must first determine whether the applicant is: 

A. indigent, that is, they have insufficient assets, formal “Estate”, or means of support in order to qualify to receive and to continue receiving such benefits, and

B. disabled.

SSI provides monthly income of up to $947.00, and Medi-Cal provides for the payment of certain categories of medical services to qualified persons. In most cases persons with disabilities cannot earn enough monthly income to support themselves, nor can they obtain medical coverage to meet either their basic health nor their special medical issues. Therefore SSI and Medi-Cal provide a safety net of income and medical insurance.

3. What Is A Special Needs Trust ?
SSI & Medi-Cal benefits are conditioned in part in the recipient being “indigent”; i.e., having no more than $2,000.00 in exempt assets such as cash, and no formal “Estate”. The receipt of such non-exempt assets will result in either a reduction, suspension or a termination of monthly SSI payments and likely loss of Medi-Cal benefits as well. 

The most common ways these non-exempt funds arise are:

A. UGMA payments in the name of the special needs person during his or her minority;

B. Inheritances from well-meaning relatives;

C. Intestate inheritances from parents; and/or,

D. Personal injury awards to the recipient.

These types of non-exempt funds result in the recipient now having an “Estate” and no longer being “indigent” for SSI purposes. Therefore, in order to preserve eligibility for receipt of SSI benefits, the funds must be ordered into a Court-supervised special needs trust pursuant to Probate Code § 3600. These trusts require regular accounting and the posting of a bond to prevent loss to the beneficiary of the trust.

But Note: On termination of a Court-supervised SNT, the trust balance is subject to a pay-back to the State Department of Health Care Services up to the entirety of the residue of the SNT account. See 1993 Omnibus Budget Reconciliation Act (OBRA 93).

*The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

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