Special Needs Trust Attorney in San Jose

As the father of a son with special needs, I know the question parents can lose sleep over:

How do I provide for my child without jeopardizing the benefits they depend on?

For many families, the answer is a special needs trust.

I help parents and other family members in Santa Clara, San Mateo, San Francisco, and Santa Cruz counties create special needs trusts as part of a complete estate plan. The goal is not simply to leave money behind. It is to make sure that money can improve your loved one’s life while preserving access to important public benefits when possible.

What Is a Special Needs Trust?

A special needs trust is designed to hold assets for a person with a disability while helping preserve eligibility for certain means-tested public benefits, such as Supplemental Security Income (SSI) and Medi-Cal, when the trust is properly structured and the applicable program requirements are met.

Leaving assets directly to a person who receives means-tested benefits can affect their eligibility. An inheritance or other assets received directly by the beneficiary may create problems that could have been avoided with better estate planning.

This is why special needs planning involves more than simply creating a trust. Beneficiary designations, retirement accounts, life insurance, your living trust, and other parts of your estate plan all need to work together.

A properly drafted special needs trust gives a trustee the ability to manage money for your loved one’s benefit without simply handing the assets to them outright.

Third-Party Special Needs Trusts

For parents and other family members planning for the future, a third-party special needs trust is often an important part of the estate plan.

A third-party special needs trust is funded with assets belonging to someone other than the person with special needs. For example, parents or grandparents can leave assets for a child or grandchild through the trust rather than leaving those assets directly to the beneficiary.

A third-party special needs trust can be incorporated into a revocable living trust or established as a separate trust. It can receive gifts during your lifetime and assets from your estate after your death.

One important advantage is what happens to the assets remaining in the trust after the beneficiary dies. Because the assets belonged to the third party who created and funded the trust, a third-party special needs trust generally is not subject to Medi-Cal recovery by the California Department of Health Care Services.

That is different from a first-party special needs trust, which is funded with assets belonging to the beneficiary. First-party trusts have different requirements and generally include provisions for repayment to the state for qualifying Medi-Cal benefits provided to the beneficiary.

The distinction between these two types of trusts is extremely important when planning for a family member with special needs.

What Can a Special Needs Trust Pay For?

A trustee can generally use trust funds for many things that improve the beneficiary’s quality of life, including:

Education, training, and therapies
Recreation, travel, and hobbies
Technology, phones, and computers
Transportation
Medical and dental expenses not covered by Medi-Cal
Personal care services
Clothing and other personal needs
Professional services and other expenses that benefit the beneficiary

The rules surrounding distributions can be complicated, particularly when a trust pays for food or shelter or provides money directly to the beneficiary. Some distributions can affect SSI benefits even when the trust itself is not treated as a countable resource.

For that reason, a trustee should understand the beneficiary’s public benefits and keep careful records of trust distributions.

For more on the trustee’s responsibilities, see What Are a Trustee’s Duties in California?.

Special Needs Trusts and ABLE Accounts

A CalABLE account can be another useful tool for a person with a disability.

ABLE accounts are tax-advantaged accounts that can be used for qualified disability expenses, including expenses related to health care, education, housing, transportation, technology, and other needs.

One practical difference is that an ABLE account can give the beneficiary or an authorized person more direct control over day-to-day spending, while a special needs trust places management of the trust assets with the trustee.

The two tools do not necessarily compete with each other. Depending on the family’s circumstances, an ABLE account and a special needs trust can work together as part of a broader plan.

Common Special Needs Planning Mistakes I See

Leaving an inheritance directly to a child with special needs

This is almost always done with the best intentions. But if the child receives assets directly, those assets can affect eligibility for means-tested benefits.

A better approach is often to have the inheritance pass into a special needs trust instead.

Naming the child directly on a beneficiary designation

A beneficiary designation on a life insurance policy, retirement account, or other account can bypass your living trust entirely.

That means you can have a beautifully drafted estate plan and still accidentally leave an asset directly to your child.

Beneficiary designations need to be coordinated with the special needs trust.

Relying on a sibling to “take care of it”

Parents sometimes think they can simply leave money to a responsible sibling and ask that sibling to use it for their brother or sister.

That creates a very different legal arrangement.

Money left to the sibling belongs to the sibling. It can become involved in the sibling’s divorce, creditor problems, bankruptcy, estate, or other financial issues.

A special needs trust keeps the assets dedicated to the person you intended to benefit.

Choosing a trustee without thinking about the job

Being a trustee is more than managing a bank account.

The trustee may need to understand public-benefit rules, keep records, coordinate with family members and caregivers, communicate with professionals, and make decisions about distributions over many years.

Choosing the right trustee and naming appropriate successor trustees is an important part of special needs planning.

For more planning pitfalls, see Estate Planning Mistakes I See Most Often in Silicon Valley.

Planning Beyond the Trust

A special needs trust works best when it is part of a coordinated estate plan.

That plan may include:

Choosing the trustee and successor trustees
Reviewing life insurance and retirement-account beneficiary designations
Coordinating the special needs trust with your living trust
Providing instructions and guidance for future trustees
Considering guardianship or conservatorship issues where appropriate
Planning for the possibility that parents or other caregivers will no longer be available
Leaving practical information about your loved one’s routines, preferences, care, and needs

One thing I emphasize with families is that money and care are two different parts of the plan.

The trustee manages the trust assets. A guardian, conservator, family member, or other caregiver may be responsible for different aspects of the person’s care. Those roles should not be confused.

Guardian vs. Trustee: What’s the Difference? explains how those roles fit together.

What Happens When Parents Are No Longer Here?

This is often the hardest part of the conversation for parents.

Creating the trust is only one piece of the planning. You also need to think about who will manage the trust, who will care for your child, and what information those people will need.

Your estate plan can provide instructions for the trustee and successor trustees. You can also leave practical information that would help future caregivers understand your loved one’s daily routines, preferences, medical needs, communication style, and other important details.

The goal is to make the transition as manageable as possible for the people who will eventually step into those roles.

For more on this issue, see What Happens When a Parent of a Special Needs Beneficiary Dies?.

Frequently Asked Questions

Does every person with a disability need a special needs trust?

No. Whether a special needs trust is appropriate depends on the person’s assets, benefits, family circumstances, and long-term needs.

The most important question is often whether the person receives or may in the future receive means-tested benefits that could be affected by receiving assets directly.

What is the difference between a first-party and third-party special needs trust?

A first-party special needs trust is funded with assets belonging to the person with the disability. These trusts have specific requirements and generally include provisions for repayment to the state for qualifying Medi-Cal benefits after the beneficiary’s death.

A third-party special needs trust is funded with assets belonging to someone else, such as a parent or grandparent. Properly structured third-party trusts are not subject to recovery by DHCS.

The distinction is important because the two types of trusts are subject to different rules.

Can a special needs trust be part of my living trust?

Yes. A third-party special needs trust can be incorporated into a larger estate plan, including provisions in a revocable living trust that direct assets into a special needs trust for a beneficiary.

The important thing is that the estate plan is drafted so that assets intended for the beneficiary actually pass into the special needs trust rather than directly to the beneficiary.

Can a special needs trust work with an ABLE account?

Yes. An ABLE account and a special needs trust can serve different purposes and may be used together. CalABLE accounts allow people with qualifying disabilities to save and spend for qualified disability expenses.

Can a special needs trust own a house?

Potentially, yes. But housing is an area where the interaction between trust distributions and public benefits can become complicated.

The effect of a housing expense can depend on the type of trust, the benefit involved, who owns the property, and how expenses are paid. Trustees should understand the applicable rules before making housing-related distributions.

Should I name my child with special needs as a beneficiary of my life insurance or retirement account?

This is something you should discuss with your estate-planning attorney before making the designation.

A direct beneficiary designation can cause assets to pass outside your trust and potentially create problems for a beneficiary receiving means-tested benefits. Beneficiary designations should be coordinated with the rest of the estate plan.

Why Families Choose the Law Office of Adam T. Evan

Special needs planning is personal for me.

As the father of a son with special needs, I understand why parents are concerned about what happens to their child when they are no longer able to provide the same level of support themselves.

My practice focuses on estate planning, probate, trust administration, guardianships, and related planning for families throughout Silicon Valley. When a special needs trust is appropriate, I look at it as part of the family’s overall estate plan, not as an isolated document.

That means considering the trust, beneficiary designations, successor trustees, guardianship issues, and the practical realities of caring for your loved one over the long term.

Schedule a Consultation

If you are a parent, grandparent, or other family member planning for a loved one with special needs, I can help you understand your options and determine how a special needs trust may fit into your estate plan.

Meetings are available at my San Jose office or by video, with evening and weekend appointments available on request.

To discuss special needs planning for your family, contact the Law Office of Adam T. Evan at (408) 515-9005.