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Need a Special Needs Trust?

If you have a loved one who is currently receiving Supplemental Security Income or SSI from Social Security due to a disability, then they are subject to strict rules about how much property or money they can own and still keep their eligibility for the payments.  Remember, SSI is a "means tested" benefit, meaning you have to be both disabled under the Social Security definition, and be "poor" under their regulations.  SSI is different from SSDI, which is paid to a disabled worker on account of their work history, and does not have any limit on what kind of assets the recipient can own.

If the person on SSI gets a gift, or an inheritance that puts them over the legal limits, they can lose eligibility until those extra funds are gone.  

To prevent this, you can avoid giving money to the person eligible for SSI.  If its a relative, say a niece or nephew, you can provide in your will that you will leave your money to someone else with a request that they use it to take care of the relative on SSI.  This can work, but it risks the money being spent by the other relative, or being taken by the other relative's creditors if they are sued.  

Setting up a trust, and giving the inheritance or gift to the trust, means the money HAS TO be used for the benefit of the SSI recipient.  It is drafted in a way that says while it has to be used for the SSI beneficiary's benefit, it is up to someone else, the person called the Trustee, to decide if, when, and how that money is used.  This makes it OK with Social Security.  They won't count the trust or the money in it as an asset of the SSI beneficiary as long as it is set up this way.

The rules get more complicated if the money or property involved was ever properly owed to the SSI beneficiary.  If he or she could have sued to get it, then its their property, and its more complicated to put it into a trust, but it can still be done. 

These trusts are simple in theory, but they have complications.  There are many means tested benefits, not only SSI.  Section 8 housing, Medicaid, some forms of Medi-Cal even after Obamacare, and all have different rules.  In planning to leave money to someone, the person giving the money also has to do some planning. Should they leave the money now, or later when they pass on?  How much?  What types of property?  What about tax planning?  

These are complicated issues.  They can result in "planning paralysis."  By all means, go see a specialist in estate planning.  I can refer you.  Most specialists these days will include a Special Needs Trust provision in their plan documents that will take care of SSI beneficiaries needs.  But the process will take money.

In the meantime, my offer is to set up a very simple Special Needs Trust that will work in the meantime to ensure that your loved one does not lose his SSI benefits due to a gift of money you want to give him or her now, or later by leaving it to them in an inheritance. 

It is not recommended for receiving assets that could be claimed by the beneficiary as rightfully paid to him or her, e.g., a personal injury settlement fund, workers compensation benefits, money they won in a lottery or already received from someone else.  These funds have to be dealt with separately.  

It is recommended for someone who plans on leaving some money or other property to an SSI recipient, but doesn't have allot of money to worry about tax planning or to pay for a comprehensive estate plan.  It includes a simple will (or amendment to a will or trust) and a stand alone Special Needs Trust. 

I, a licensed California Attorney will prepare the trust and get it to you for signature, give you a basic idea of how it will all work, and set you up with a taxpayer ID for the trust so that you can open up a bank account in the name of the trust to hold any money for the SSI beneficiary and trust beneficiary. I also mail a copy to Social Security disclosing its existence and explaining its exemption from being considered as an asset of the SSI recipient.

The fee is a flat fee of $500.  The trust and service is basic. I do not recommend it for planned gifts in excess of $100,000.  It is worthless if you don't make sure to change your will and insurance policies and retirement or other benefit plans to pay out to the trust instead of to the beneficiary directly.

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