In my estate planning practice, I often have clients who wish to make gifts or bequests to children or other family members who are receiving public benefits without interfering with those benefits. This may be possible through the use of what is known as a Special Needs Trust. A Special Needs Trust allows funds to be set aside, in trust, for beneficiaries who are on public benefits without causing the beneficiary to lose his or her eligibility for those benefits. The funds held in the Special Needs Trust can then be used to supplement the beneficiary’s public benefits to provide a quality of life for the beneficiary that he or she would not otherwise enjoy.
When to Consider a Special Needs Trust
Are the Public Benefits Needs-based? Not all individuals receiving public benefits will lose eligibility for those benefits due to a gift or bequest – it all depends upon what type of public benefits the person is receiving. The key determination is whether the public benefits the individual is receiving are “needs-based.” Needs-based benefits are those public benefits that require that the recipient earn below a certain income and/or have less than a certain amount of assets in order to qualify for the benefits. Needs-based benefit programs include SSI, Medi-Cal (known as Medicaid outside of California), IHSS and others. All of those benefit programs have asset and income ceilings that a recipient must not exceed in order to qualify for the benefit. In contrast, social security and Medicare do not have maximum asset and income levels and therefore they are not considered needs-based programs.