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Special Needs Trust Lawyer in Downey Providing Counsel to Clients on Important Life Decisions

Navigating benefits eligibility can be difficult, and it’s challenging to understand what is counted toward income for those with special needs and what’s not. Special needs trusts are a valuable financial planning tool for many people who need to balance planning for the future and remaining eligible for essential benefits. Understanding how a special needs trust works and how it impacts eligibility for state and federal benefits can help you determine if it’s right for your situation.

If you have questions about special needs trusts or other financial planning tools, our firm can help. Call Resolve Law Firm today to schedule an appointment with an attorney to find out what your options may be and how a special needs trust can help protect your loved one’s future.

What Is a Special Needs Trust?

A special needs trust is a trust that is designed to preserve assets to supplement someone’s government benefits without affecting their eligibility for those benefits. It’s called a special needs trust because it is often used to ensure those with special needs have a secure financial future.

Government benefits, such as Medicaid and Supplemental Social Security Income, have stringent income and asset requirements for eligibility. It can be difficult for those with special needs to qualify for these programs and still be able to afford the things they need to maintain their quality of life. A special needs trust solves this problem because the beneficiary doesn’t actually own the assets in the trust, meaning they don’t count toward their income or assets. This allows the beneficiary to receive federal benefits and payments from the trust as needed.

Who Can Create a Special Needs Trust?

Most special needs trusts are called third-party special needs trusts or supplemental needs trusts. These can be set up and funded by anyone other than the beneficiary. Often, this is a parent, grandparent, or legal guardian, but this doesn’t have to be the case.

A lesser-used special needs trust called a first-party special needs trust or self-settled trust is set up and funded by the beneficiary themselves. To be able to do this, the person must be of sound mind and mentally capable of understanding what they are doing. It’s also possible for this type of trust to be funded by a legal guardian. The key differentiating factor is that it is funded with the beneficiary’s assets.

How Do You Establish a Special Needs Trust?

The first step in establishing a special needs trust is to ensure that you understand what’s required, who is eligible, and how it will impact other financial aspects, such as benefits eligibility or taxes. This usually involves talking with an attorney who has experience in this area and can provide information and counsel specific to your situation.

Once you’ve determined that a special needs trust is an option you want to pursue, you will need to choose a trustee. The trustee is in charge of managing the trust, including investing the assets and providing disbursements to the beneficiary. There are no limits on who can be the trustee, as long as they are an adult, of sound mind, and willing to take on the role.

After the trustee is decided, the paperwork for the trust will need to be completed and notarized. This includes registering the trust with the IRS. An attorney can help you with all of this to ensure that everything is in accordance with the law and done correctly.

The last step is to fund the trust by transferring assets into the trust. A trust can include everything from cash and physical property to real estate and investments.

How Are Assets Transferred to a Special Needs Trust?

Assets can be transferred to a special needs trust in a few ways. One of the most common is by naming the trust as a beneficiary on a life insurance policy, retirement plan, or investment account. Special needs trusts can also be funded by an inheritance or through financial gifts from loved ones.

The key piece to keep in mind is that the special needs trust must always be listed as the beneficiary instead of the person with special needs. Otherwise, the assets could be counted toward the person’s benefits eligibility.

What Is a Pooled Special Needs Trust?

Pooled special needs trusts are a specific type of trust also known as a d4C trust. These trusts are managed by nonprofit organizations. The nonprofit pools all the assets together and invests them. The funds are disbursed across the beneficiaries according to their share of the combined amount.

Pooled trusts are more complicated than basic special needs trusts, and it’s important to have an attorney review any option you’re considering before signing. Pooled special needs trusts can have long, detailed contracts that require thorough review, and the fee structures can be complex. They may also have restrictions on what types of assets they are willing to include, and this could be a significant deciding factor on whether this is a viable option. It’s important to understand exactly what the terms of the trust are and how the assets will be handled and disbursed before moving forward.

Setting up a special needs trust can be challenging, especially if you’re trying to do so without an understanding of the benefits and tax implications while also taking care of a loved one. But you don’t have to go through this process alone. When you work with Resolve Law Firm, APC, you get dedicated legal help with setting up and managing a special needs trust. Call 213-583-5547 to schedule your appointment and discuss your goals with an attorney.