What Is a Special Needs Trust?

A special needs trust is a way to provide support for a person who is physically disabled, mentally disabled, or chronically ill without reducing their eligibility for public assistance, such as Social Security, Medicare, or Medicaid. Special needs trusts are irrevocable. Two options are available: first-party and third-party special needs trusts (SNT). The simple distinction between a first-party SNT and a third-party SNT is that the first party is funded by assets that belong to the beneficiary and the third party is not.

A special needs trust can be set up as part of your estate plan to go into effect on your death or can be effective immediately to help the beneficiary now.

In California, first-party SNTs must include federal and state provisions and are repaid to the state when the beneficiary dies. The Department of Healthcare Services legally must recover up to an equal amount of the total medical assistance paid through Medi-Cal following termination of the trust. This is not true of third-party special needs trusts. Proper estate planning is critical to give the third-party option.

What Is a Child’s Trust

A child’s trust is created specifically for children and is managed by a trustee until the children have reached financial maturity. These are set up as an integral part of an estate plan to leave funds for children once they achieve a milestone, such as a specific age (usually 25 or older) or college graduation. A child’s trust is also referred to as a children’s trust or a minor’s trust. These trusts avoid probate, guardianships, and possibly taxes as well. They typically provide for the child’s care, support, maintenance and education until the age(s) you designate. As part of your estate plan, you can create both a special needs trust and a child’s trust to protect your special needs children. How you choose to allocate funds to each trust will depend on the age of your children and the severity of their disability.

Review Your Special Needs Trust Regularly

The best estate plans are reviewed regularly. Situations change, relationships begin and end, and children get older. To ensure that your children are properly cared for should you pass away before they are grown, you should be developing a comprehensive plan that you review regularly. If you are the parent of an older or adult child with special needs, you can create a special needs trust for them now, as part of your estate plan, to maintain them throughout their lives.

The Estate Planning Support Your Family Needs

Haven’t built your estate plan yet? We’re here to help! For more than 30 years, Joel A. Harris has been protecting the estates of families throughout California. If you want some help navigating the ins and outs of protecting your estate or establishing a trust to protect your future, feel free to visit us online, in person, or call us by phone at (925) 757-4605.

Four Tips For Effortless Estate Administration

Being put in charge of a loved one’s estate doesn’t have to be stressful. If you are the executor of an estate or successor trustee of a trust, then you have a legal responsibility to manage the assets of the trust or estate in accordance with both the will/trust and applicable State laws. According to Judy Martel at Bankrate, “The executor’s natural inclination is to “make everyone happy and distribute the assets . . . but if the executor rushes and misses some crucial legal steps, he or she could be found personally liable. This is where having an attorney who knows the rules will help.”

Since this can be a difficult task for anyone, here are our Four Tips for Effortless Estate Administration:

One: Locate and Protect All Assets

According to  Foxbusiness  The very first thing an Estate Executor or Trustee should do is determine, locate, and protect all assets. Assets can be property, artwork, bank accounts, and more. This is most likely the first thing your attorney will ask you for.

Two: Decide Who Gets What

Deciding who gets what is often the most stressful part of this process, because often times people have vested interests in certain things due to nostalgia, or value.  Bankrate  says It’s important to remain impartial to all parties involved and follow the guidelines of any wills or trusts. Identify and inventory the decedent’s property, and have that property appraised, Pay debts and taxes, and Distribute the remaining property according to the terms of the Will or Trust.  If there is no Will or Trust you must use your State’s laws of intestate succession (this is usually supervised by the probate Court).

Three: Take Your Time

You don’t have to rush this process. According to  HanleyLaw,  the Executor’s [or Trustee’s] natural inclination is to “make everyone happy and distribute the assets.” However be sure that while doing this you follow the proper legal guidelines in the proper order. Take everything a step at a time. It’s easy to become daunted by how much there is to be done. Divide everything into small steps, and focus on one step at a time.

Make sure to use due diligence with each step in order to make the entire process go as smoothly as possible. Expect there to be a few hiccups along the way, that’s just a part of the job, and prepare accordingly.

Four: Seek Professional Advice

You can avoid mistakes by consulting with an estate attorney who is a State Bar Certified Specialist in Estate Planning, Trust & Probate Law.  Your financial advisor and CPA can also provide  expertise. We encourage you to reach out to the Law Offices of Joel A. Harris for any Estate Administration needs.