A traditional trust and a special needs trust both serve as tools for managing assets, but they differ significantly in their purpose and how they impact beneficiary eligibility for government benefits. A traditional trust is generally established to manage assets for the benefit of an individual, with the trustee distributing income and principal according to the trust’s terms, often with the goal of providing ongoing financial support and eventually distributing the assets outright. Conversely, a special needs trust (SNT), also known as a supplemental needs trust, is specifically designed to hold assets for a person with disabilities without disqualifying them from crucial needs-based government assistance programs like Supplemental Security Income (SSI) and Medicaid. Approximately 1 in 4 Americans live with a disability, and proper planning with an SNT can be the difference between financial security and reliance on overburdened public resources.
What happens if I simply leave assets to my disabled child?
If you directly leave assets to a beneficiary receiving SSI or Medicaid, those assets will be counted toward the program’s resource limits—currently $2,000 for SSI and varying by state for Medicaid. Exceeding these limits results in immediate loss of benefits, leaving the individual without essential support. For example, I remember speaking with a woman, Sarah, whose father had passed away leaving her a modest inheritance of $15,000. Because Sarah was receiving SSI and Medicaid, this inheritance immediately jeopardized her benefits, and she faced the daunting prospect of losing the care she depended on. She was devastated and felt like her father, though well intentioned, had inadvertently harmed her.
Can a special needs trust cover all types of expenses?
A properly drafted SNT allows a trustee to use trust funds to supplement, not replace, government benefits. This means funds can be used for things like education, recreation, travel, dental and vision care not covered by Medicaid, and specialized equipment or therapies. However, trust funds *cannot* be used for necessities already covered by government assistance—such as housing, food, and basic medical care. “The key is supplementation, not substitution,” Steve Bliss often explains. “We aim to enhance the quality of life without jeopardizing crucial support.” Approximately 68% of people with disabilities live on less than $15,000 a year, illustrating the critical role supplemental funding can play. The trust document will clearly define permissible expenses and give the trustee discretion to make responsible decisions aligned with the beneficiary’s best interests.
What are the different types of special needs trusts?
There are two primary types of SNTs: first-party or self-settled trusts and third-party trusts. A first-party SNT is funded with the beneficiary’s own assets—often the proceeds from a personal injury settlement or inheritance they receive directly. These trusts *require* a “payback” provision, meaning any remaining funds upon the beneficiary’s death must be used to reimburse the state for Medicaid benefits received. A third-party SNT, however, is funded with assets from someone *other* than the beneficiary—such as parents, grandparents, or other family members. These trusts do not require a payback provision, allowing any remaining funds to pass to other designated beneficiaries. A man named David came to Steve Bliss after his son, Mark, was involved in a car accident and received a substantial settlement. Initially, he was thrilled, but concerned about losing Mark’s Medicaid eligibility. Steve guided him through establishing a first-party SNT, ensuring Mark could receive the settlement funds while maintaining his vital benefits.
How can a special needs trust provide long-term security?
A well-structured SNT offers significant long-term security and peace of mind. It ensures that a loved one with disabilities will continue to receive the care and support they need, even after the grantor is no longer able to provide it. The trust can be designed to last for the beneficiary’s entire lifetime, or even provide for future generations. One of the most rewarding parts of Steve Bliss’s work is witnessing the positive impact these trusts have on families. He recalls a family who established a third-party SNT for their daughter with Down syndrome. Years later, after their passing, the trust continued to provide her with enriching experiences—art classes, travel opportunities, and a comfortable living arrangement—that significantly enhanced her quality of life. This illustrates the power of proactive planning and the lasting legacy an SNT can create. Approximately 11.1% of Americans have a disability, underscoring the importance of estate planning tools like SNTs.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What is a pour-over will and when would I need one?” Or “Can real estate be sold during probate?” or “Is a living trust suitable for a small estate? and even: “Can I be denied bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.