A Special Needs Trust (SNT) is designed to preserve trust assets for the special needs of a disabled beneficiary without jeopardizing the beneficiary’s public assistance benefits.
Public benefits are available for persons who are blind, disabled, older or in need of skilled nursing care. These benefits are designed to provide food, clothing, shelter and essential medical benefits to the recipient. The purpose of a SNT is to protect a beneficiary’s eligibility to receive government benefits (such as SSI and Medi-Cal), and still allow the beneficiary to benefit from the assets in a SNT. Thus, the SNT can provide for things not paid for by the government, such as a specially equipped van, additional medical care, a motorized wheelchair, vacations or entertainment.
- Discretionary Distributions, Not Mandatory: The trustee must have discretion to pay for the special needs of the beneficiary; the payments cannot be mandatory. The trust funds generally should not be used for food, clothing or shelter. Careful planning and legal advice is important to guide the trustee and to prevent inadvertent disqualification from public benefits.
- Examples of Special Needs: Special needs which can be paid for by the SNT include: entertainment, recreation, movies, vacations, specially designed equipment for the beneficiary, medical costs not covered by Medi-Cal and dental costs not covered by Medi-Cal.
- Beneficiary Restricted Access: The trust assets must be unavailable to the beneficiary; this means that the beneficiary cannot demand payment by the trustee.
- Income Tax: A SNT is irrevocable and will have its own individual tax identification number, the trustee will submit annual fiduciary tax returns and taxes will be paid out of the SNT.