Securing Public Benefits: The Power of Special Needs Trusts

Temecula Elder Law Attorneys provide the following advice. Depending on the type of public benefits a person with a disability is receiving, if that person receives assets (or already has assets), they should be familiar with the available options to preserve those public benefits.

 Good planning is essential because either having assets or receiving assets may cause the person with a disability to lose his or her benefits. 

Usually, recipients of Supplemental Security Income (SSI) and categorically eligible Medi-Cal stand to lose those benefits until the assets are spent to specified levels. (i.e., the resource limits for SSI are $2000 for an individual and for Medi-Cal $130,000 for an individual}. 

The primary planning tool is transferring the assets into a special needs trust (SNT), but it is not the only option.

The available options to a benefits recipient in this situation are:

  • Placing assets in a first party SNT authorized under 42 USC §1396p(d)(4)(A) (commonly called a (d)(4)(A) SNT) to preserve both assets and needs-based public benefits. 
  • Joining a pooled SNT, another form of a first party SNT, authorized under 42 USC §1396p(d)(4)(C) (also called a (d)(4)(C) SNT) to preserve both assets and needs-based public benefits. 
  • Doing nothing and possibly losing needs-based public benefits until assets are spent to below the specified level.
  • Spending the assets on exempt assets such as a personal residence or automobile.
  • Gifting, transferring, or disclaiming assets, which results in the loss of some or all needs-based public benefits for a period of time.
  • Modifying a disqualifying inheritance trust into a third party SNT.
  • Establishing an ABLE account; or
  • Some combination of the above.

 Only Certain Public Benefits Need to Be Protected

If the only public benefits received by the person with a disability are entitlement benefits, planning may be unnecessary because it is irrelevant how much a person has in assets to qualify for these programs.  

Government benefits are divided into two main categories:

  • Needs-based public benefits. The most common needs-based public benefits are SSI, traditional and expanded Medi-Cal, Section 8 housing, Veteran Benefits, Cal Fresh (food stamps), and In-Home Supportive Services (IHSS). These benefits will require planning to maintain because each has stringent income tests, resource tests, or both. 
  • Entitlement public benefits. The most common entitlement benefits are old age Social Security, Social Security Disability (SSDI), and Medicare. Social Security, SSDI, and Medicare are employment-related, public insurance programs that are neither needs-based nor means-tested.. Note that SSDI, which is an entitlement, is not the same benefit as SSI, which is needs-based. Adult Disabled Child (ADC) benefits received on a parent(s) SSA eligibility are often confused with other benefits but they are considered an entitlement benefit.

Planning to avoid losing public benefits is complex. It is important that you speak to our Temecula and Murrieta Elder law or estate planning attorneys so they can help you with appropriate planning. To schedule an appointment at our Temecula office or one of our other offices located throughout the state of California, contact us at  (800) 244-8814

If you have any further questions about estate planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at one of our offices located throughout the state of California 800-244-8814 to set up a consultation.

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