• Benefits of a Special Needs Trust

Benefits of a Special Needs Trust in Estate Planning

A trust is a legal arrangement that allows one person (or business) to hold the legal title to property for another person referred to as the beneficiary. A trust, after created, is funded when property is transferred into it. This includes property such as real estate, financial accounts, and other tangible items. There are many benefits of a special needs trust in estate planning. A special needs trust is created for the sole benefit of a disabled or mentally ill beneficiary. A special needs trust beneficiary usually lacks the mental capacity to manage her own finances. Therefore, the trustor creates a special needs trust for the specific needs, lifestyle, and future well-being of the beneficiary. The special needs trust can last as long as it is needed.

First, you will need to pick a trustee you can trust to administer the special needs trust for your loved one. Some trustees have the power to end the trust once it is no longer needed. You should appoint a trustee that knows and understands the beneficiary’s needs, a point often overlooked. Family members often serve as the trustee. You may consider performing annual audits on the trustee to make sure they are following the trust terms.

People who are blind, hard of hearing, who have down syndrome, physical paralysis, or suffer from chronic mental illness benefit from a special needs trust. Contact A People’s Choice for more information about estate planning for the disabled and creating a special needs trust for your loved one.

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Benefits of a Special Needs Trust

There are many benefits in creating a special needs trust.  For example, a person may want to create a special needs trust to prevent the government from gaining control over or avoid losing eligibility for Supplemental Security Income (SSI) or Medicaid benefits. One of the benefits of a special needs trust is that SSI and Medicaid will ignore property in the special needs trust when considering program eligibility. Keep in mind, the trustee should not give money directly to the beneficiary. Doing so could interfere with SSI or Medicaid eligibility. In contrast, the trustee should spend trust assets to buy food, clothing, and medical expenses for the beneficiary in addition to paying the beneficiary’s rent or mortgage. Even if you are not concerned with government benefits for the beneficiary, you should still consider a special needs trust to address the beneficiary’s needs.

One of the other benefits of a special needs trust pertains to taxes. Funds used to create a special needs trust are tax-deductible. Creditors are also not allowed to file a lawsuit against a special needs trust for monies owed. Special needs trust funds are used for the beneficiary.

There are many benefits of a special needs trust so one might wonder why people are hesitate to create them. In the past, one of the disadvantages of a special needs trust has been the high cost to create one. Fortunately, you can hire A People’s Choice as an affordable alternative to working with an attorney. The majority of trusts, whether a revocable living trust, irrevocable trust, spendthrift trust or special needs trust, are created by using complex legal software. A People’s Choice uses the same software that many licensed California attorneys use. As a result, with our easy interview process and legal software,  we can help you save thousands of dollars in preparing a special needs trust for your loved one. Contact us at 800-747-2780 today to find out how we can help you with your estate planning needs.

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By |2018-01-18T15:46:02-07:00November 23rd, 2017|Estate Planning|2 Comments

About the Author:

Sandra M. McCarthy, founder of A People’s Choice Inc., has worked exclusively in the legal field since 1976. She served as the 2004-2005 President of CALDA (California Association of Legal Document Assistants). She obtained a Paralegal Certificate from the University of California, Santa Barbara. During her career in the legal field, she has worked as a freelance paralegal, law office manager and paralegal studies teacher, and has co-authored numerous legal publications and written hundreds of self-help legal articles. As a registered Legal Document Assistant, Sandy is dedicated to providing affordable, low-cost, self-help document preparation services for California consumers in all 58 counties.


  1. Tami January 8, 2018 at 2:35 am - Reply

    A few questions;

    1. Can a parent transfer more than $14,000 a year into a SNT and avoid gift tax?

    2. can a parent transfer assets into a SNT for a disabled child without a ‘look-back’ period if the parent needs to become Medi-Cal eligible?

    3. If the SNT pays the mortgage on the home the disabled child lives in, does that payment constitue a distribution / income that would affect Medi-Cal eligibility?

    4. If the property placed in the SNT earns income, (I.e. Rental income dividends, capital gains), how is that income taxed?

    5. If a property is sold after it has been placed in a SNT, what will be the basis for capital gains?

    6. Are there special concerns to be aware of that could affect Medi-Cal eligibility?

    • Sandy McCarthy January 12, 2018 at 4:36 am - Reply

      You are asking questions that would be considered legal
      advice or counsel. I would recommend d that you present these questions to an estate planning attorney and your CPA. Once you have your answers, we can assist you with the preparation of the documentation for a Special Needs Trust.

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