Parents often want to make sure that their children and loved ones are taken care of, even after the parents’ death. For this reason, many California parents have life insurance policies, investment accounts, wills and even trusts in place to make sure that the children have what they need. It is important that each individual thinks through and act upon the best way to transfer assets so that the needs of the family are met and the inheritance is maximized.
Once children reach legal age, the majority of them are able to make their own financial decisions. However, there are some individuals that are not capable of this. When the loved one who is to be the beneficiary is mentally disabled, other arrangements will need to be made. Many find that a special needs trust is the appropriate solution.
Most mentally disabled individuals qualify for and receive government assistance. This assistance can be in the form of income, housing subsidies, vocational assistance, Medicaid insurance and more. However, these types of assistance come with stipulations regarding income. A direct inheritance could make the individual no longer eligible for the needed government assistance.
A special needs trust allows assets to be set aside and used for the benefit of the mentally disabled individual. The trustee manages the account and makes purchases for the benefit of the individual. By using a special needs trust, the individual does not actually receive the assets; therefore, they are generally not considered in determining eligibility for government assistance. Additionally, if the individual is sued, these assets are not considered in any judgment against the individual. California residents who are interested in using a special needs trust to transfer assets will want to work with experienced legal counsel to ensure that all the required criteria are met.
Source: estate.findlaw.com, “Special Needs Trusts FAQ’s“, Accessed on Jan. 7, 2017
