Newman Law Group

Transfer assets with a special needs trust

A disabled individual faces certain unique struggles in saving money for his or her needs. For the disabled individual who has been disabled for his or her entire life, a parent may wish to transfer assets to that person upon death and ensure that he or she will have all needs provided for in the future. In some cases, however, a large pool of assets can jeopardize the disabled person's benefits and may not be worth the risk. California residents have several options when choosing to save for the benefit of disabled individuals. 

One way to support a disabled person with financial gifts is to set up a special needs trust. This type of trust allows the person to receive financial resources while holding the assets in trust. Since the assets are not in the disabled person's name, benefits programs are not affected. Distributions from the trust can be used for financial needs that are in his or her best interests, that aren't covered by other benefits programs, are for his or her sole benefit and are fiscally prudent. 

Other programs also exist to help the disabled person save money. An ABLE savings account can be created and the funds used for qualified disability benefits. Anyone can contribute to these accounts. IDA and PASS accounts are accounts that help a person receive job training or save for business needs. 

When the time comes to transfer assets to a disabled adult child, an individual will want to look carefully at how benefits may be impacted. If the benefits can be maximized while keeping important savings, a person has a greater chance at financial security. In California, an experienced estate planning attorney may have greater insight on disability-friendly savings programs and trusts.

Source: msue.anr.msu.edu, "Four ways persons with disabilities can safely save for the future", Brenda Long, April 4, 2018

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