My disabled child receives SSI and Medi-Cal. How does that affect my estate plan?

If a loved one is disabled and receives needs-tested public benefits, you should know that an inheritance, gifts or other assets can cause a disabled person to lose their Supplemental Security Income (SSI) and Medi-Cal benefits, partially or entirely.

Disabled Californians with financial need may qualify for SSI or Medi-Cal benefits to help pay for medical care, shelter and food. These services, which provide only subsistence level support, are usually available only to those disabled people with very few assets. (Not all assets are included in the calculation, contact me or your estate planning attorney for a current list of the types of assets are that are included and excluded in deciding eligibility.)

While SSI and Medi-Cal benefits do not usually provide enough for a person to enjoy a desired standard of living, the benefits do help. Californians who want provide for their children without causing them to lose public benefits can do so with a Special Needs Trust (SNT).

Instead of giving an inheritance directly to a disabled person, assets held in a SNT are managed to supplement benefits. The terms of the SNT prevent the trust funds from being “owned” by the disabled person. The trust funds are instead used to fill the gaps that public benefits do not cover. With appropriate, early planning, parents and loved ones of a disabled person can:

  • Preserve needs-based public benefits;
  • Provide financial support to supplement public benefits;
  • Select an appropriate trustee or other individual or entity to manage the inheritance;
  • Set guidelines for spending and managing assets;
  • Provide guidelines for living and personal care arrangements;
  • Set advocacy guidelines for the disabled person;
  • Improve employment and social opportunities;
  • Facilitate a comprehensive family plan;
  • Preserve assets for other heirs following the death of the individual with special needs.

The disabled person receiving needs-based public benefits who owns assets in excess of the SSI and/or Medi-Cal limits risks:

  • Losing eligibility for needs-based public benefits;
  • Being required to reimburse benefit agencies for services provided during the period when their financial circumstances made them no longer eligible;
  • Losing the benefit of a parent-direct lifetime care and advocacy plan;
  • Becoming subject to undue influence, waste or use assets in a way that the parent wants to prevent;
  • Facing institutionalization or inappropriate placement;
  • Finding family relations becoming overwhelmed or strained.

SNTs are highly technical and complex. They are governed by the probate code and state and federal laws. Rules and laws change in unpredictable ways, so if you already have a special needs trust as part of your estate plan, it might be a good idea to have an attorney review it. It’s always a good idea to have your estate plan reviewed following a law change or after about 5 years.

There is no one size fits all SNT. The needs and circumstances of each individual and family must be considered in the drafting and not all disabled people need the protection of a SNT. To learn more about special needs trusts contact me.