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Q.What is a special needs trust?
A.A Special Needs Trust (commonly referred to as an SNT, Supplemental Needs Trust, and Discretionary Trust) is an irrevocable trust designed to provide an individual who has a disability with additional resources and care without the risk of losing government aid.
The assets held in a properly drafted Special Needs Trust for the benefit of a person under a physical or mental disability, or an individual with a chronic or acquired illness, are not considered countable assets for purposes of qualification for certain governmental benefits such as SSI disability benefits, Medi-Cal, and subsidized housing. Although the child is named the beneficiary of the Special Needs Trust, it is specially designed to ensure the trust assets are not counted as part of the child's "available resources". The basic concept is that the named trustee has discretion on how the trust assets are spent on behalf of the child-beneficiary with a disability, and the beneficiary does not have any control over, or direct access to, either the income or principal of the trust.
The purpose of the Supplemental Needs Trust is to provide the beneficiary with supplemental and extra care over and above that which the government provides, without taking away the government's benefit. At present, California law only allows a person with less than $2,000 to receive SSI and Medi-Cal. It is therefore important to ensure that the Special Needs Trust own in its name certain assets for the beneficiary's use (e.g. a personal residence, vehicle, etc.). It is also important that the Special Needs Trust only make certain limited payments directly to the beneficiary, and where possible the special needs trust should make payments directly to those furnishing goods or services to the beneficiary. Each Special Needs Trust is its own "entity" with its own Federal Identification Number (Employer Identification Number) issued by the IRS.
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