When someone with special needs receives an inheritance or a personal injury award, they may no longer be eligible for needs based government benefits. However, this type of one-time windfall can be put into a trust for the recipient’s benefit so they can continue receiving their government benefit. This is called a “special needs trust” (SNT), and it is an important part of estate planning for California residents with special needs.
SNTs come in three varieties: self-settled, third party, and pooled. A recent local newspaper article highlighted pooled SNTs, which it called the most overlooked type. A pooled SNT is a type of trust with multiple beneficiaries, although each has a separate account.
Pooled SNTs can be useful when small amounts of money are involved. In such a case, setting up an individual trust may be impractical, but the amount may still be enough to invalidate a needs based benefit. Pooling the amount in a trust with others is a way not only of minimizing administrative costs, but also a way to open up investment opportunities that may not have been otherwise available.
Estate planning poses unique problems for those with special needs in California and elsewhere. Needs based government benefits are often vital for such individuals, and SNTs are a way of ensuring that one-time windfalls do not invalidate the benefit. Those with special needs or their guardians should consult with an experienced attorney about estate planning and what type of SNT may be the most beneficial. Proper planning can ensure that unforeseen events do not negatively interfere with their finances.
Source: The Lake County News, “Estate Planning: Considering pooled special needs trusts,” Dennis Fordham, Sept. 24, 2011