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How to Create a Living Trust in California

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How to Create a Living Trust in California

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How to Create a Living Trust in California in 6 Steps

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Printable tabs - Keep your child's important information/documents in a binder

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Printable tabs - Keep your child's important information/documents in a binder

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It's a concern of every caregiver: What happens when I can no longer take care of my adult family member with a disability? Enter Caring Futures. We provide resources and support for those caregivers and their families. Our program connects and guides caregivers, building a supportive and active community throughout California.

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Advance Health Care Directive - Vietnamese

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Advance Health Care Directive - Vietnamese

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Disability Benefits 101 Special Needs Trusts

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Disability Benefits 101 Special Needs Trusts

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A Special Needs Trust (SNT), sometimes called a Supplemental Needs Trust, is a legal arrangement in which a person or organization (like a bank) manages assets for a person with a disability. The person with the disability is called the "beneficiary" and the person who is managing the assets is the "trustee." Many kinds of assets can be put into a trust, such as cash, stocks, bonds, and real estate.

An SNT provides for the needs of a person with a disability without losing or reducing their benefits such as Supplemental Security Income (SSI), Medi-Cal, In-Home Support Services (IHSS), and HUD housing assistance. And assets in an SNT won't be counted toward the SSI asset limit.
Note: The rules for setting up trusts can be complicated and it is important to make sure that you seek out good advice about how to set one up in order to avoid serious problems.
If you get public benefits such as SSI, Medi-Cal, IHSS, and HUD housing assistance, the SNT must say that:

It is up to the trustee when and how to use the funds to benefit the beneficiary

The main purpose of the trust is to supplement the support and services the beneficiary gets from public benefits, and

The beneficiary cannot sell or give away her rights under the trust to anyone else and has no control of the assets.

These three statements will usually keep the assets in the SNT from being counted against your eligibility for public benefits. It is also important to know that the assets in the SNT must not have belonged to you before the trust was set up (except for a First Party SNT - see Three Types of Special Needs Trusts). This means that you cannot use the SNT as a savings account. You cannot put your own money into most SNTs. If someone you know wants to leave assets for you in their will, they must state the name of the SNT in their will, not your name.

While public benefits such as SSI, Medi-Cal, IHSS, and HUD housing assistance provide basic support for food, shelter and medical care, a Special Needs Trust can be used to add support and services in the ways most helpful to you. For example, money from the trust could be used to pay for your recreation, telephone bill, education, and vacations. The money in an SNT cannot be used for food or shelter; that is what your SSI money is for.

How does money from the SNT affect your SSI payments?

Money paid directly to providers for items other than your food and shelter will not reduce your SSI payments.

If money is paid directly to a provider for food or shelter, your SSI payment will be reduced, but only up to a certain limit.

Money paid directly to you will reduce your SSI payment.

A good way for people to give you assets, such as money, but not affect your public benefits (SSI, Medi-Cal, IHSS, and HUD housing assistance), is to give the assets to the SNT. If someone simply gives you money directly, that gift might result in a loss or reduction in the amount of your SSI checks, Medi-Cal benefits, IHSS funding, and HUD housing assistance. This will happen if that money will cause you to have more than the asset limit you can have for a program. Also, if you have a disability and you inherit money or get a settlement in a court case, those funds can also cause your SSI, Medi-Cal, IHSS and HUD housing assistance to be affected unless that money is placed directly into a First Party SNT (see Three Types of Special Needs Trusts).

Although SNTs can have huge advantages, they also have strict rules. The funds must be used to benefit only you; no one else can benefit from that SNT. Also, the trust is set up to help you, but no payments can be made directly to you. When you need to pay a provider for something that is not food or shelter, the trustee will pay the money from the SNT directly to the provider. Only the trustee can handle the money from the SNT.

Three Types of Special Needs Trusts

Third Party Special Needs Trusts

Parents usually set up and provide the money for Third Party Special Needs Trusts, often through their will, and sometimes by purchasing life insurance payable to the trust. Other family members can also put money in this type of SNT, such as grandparents, aunts, and uncles. The only person who cannot place money into this type of trust is you, the person with a disability.

Some parents place their property in a "living" trust and state in that trust that a separate SNT for their disabled child is set up. This type of SNT becomes effective immediately and is a good idea for families where aunts, uncles, and grandparents might want to leave money to the SNT. Anyone can give money to the SNT by either writing a check or writing a will naming the SNT as the beneficiary.

Note: You do not want your relatives giving money directly to you as this may lower or stop your SSI, Medi-Cal, IHSS, and HUD housing assistance.

The key to a Third Party SNT is that the money cannot be used for housing or food. Housing and food are considered "basic needs" under Social Security laws. If you are getting free housing or food from someone else, including a family member or an SNT, then there will be a penalty and your public benefits will be lowered or stopped. This is why you don't want to use assets from the SNT for housing or food.

When creating the Third Party SNT, you must decide who will get any assets that are left in the SNT after you die. Unlike other SNTs, the Third Party SNT does not need to repay the government for any Medi-Cal expenses.

First Party Special Needs Trust

A First Party SNT is used if you have accumulated many assets, inherited assets, or received assets from a court settlement. (In these situations, you actually own the money, so the funds cannot be put into a Third Party Special Needs Trust.)

It used to be that people with disabilities were not allowed to set up their own First Party SNT, even though it was their own money. A parent, grandparent, guardian, or court had to set up the trust, the trustee controlled the funds, and you could not be your own trustee. The laws changed in 2016, and this type of trust can now be set up by you, or by your parent, grandparent, legal guardian, or the court.

To qualify, you must be under 65 years old and must have a disability as defined by Social Security. If you are not disabled enough to qualify for Social Security, you cannot have this type of SNT.

The SNT has to specify that after you have died, any assets left in the SNT must be used to pay back the government for what they paid in Medi-Cal for you after the SNT was set up.

Pooled Special Needs Trust

This type of trust pools assets from different people and puts them into a large investment fund. Although the funds are pooled (used together), you still have your own separate account. Pooled Trusts offer both First Party accounts (funded with only your own money) and Third Party accounts (funded only with money from other people). As with a First Party SNT, all beneficiaries of a Pooled SNT must have a disability that meets Social Security's standards.

A Pooled SNT is set up through a nonprofit organization. The nonprofit organization will administer the Pooled SNT, take care of all the tax preparation, make investment decisions, and act as the trustee.

Before the Pooled SNT is set up, you and/or your family members must explain what you want the trust to pay for, and who should be consulted about these matters. Anyone can put money into the Pooled Special Needs Trust for you - parents, grandparents, even you.

Who can set up a Pooled Special Needs Trust?

Any money left in the Pooled SNT after you die will be used to pay back the State Department of Health Care Services for the amount of money they spent on Medi-Cal for you after the trust was set up. If money is still left over, it can be given to whomever you tell the trustee you want it to be given.

Trusts are a complicated but important issue. If you have questions about trusts you can find additional resources or an attorney in your area at the Special Needs Alliance.

For information about Special Needs Trust and SSI eligibility click here.

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Disability Benefits 101-California gives you tools and information on employment, health coverage, and benefits. You can plan ahead and learn how work and benefits go together.

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As of January 1, 2000, the supplemental security income (SSI) law on trusts changed. This information applies to trusts established on or after January 1, 2000.

WHAT IS A TRUST?

A trust is a legal arrangement regulated by State law in which one party holds property for the benefit of another. In certain situations, a trust can be set up for an SSI recipient. A trust can contain:

HOW DOES A TRUST AFFECT MY SSI BENEFITS?

If you use your assets to establish a trust on or after January 1, 2000, generally, the trust will count as your resource for SSI.

In the case of a revocable trust, the whole trust is your resource.

In the case of an irrevocable trust, if there are any circumstances under which payment could be made to you or for your benefit, the portion of the trust from which payment could be made is your resource.

See the SSI Spotlight on Resources for more information about resources and SSI.

WHAT THINGS COUNT AS ASSETS AND ARE USED TO ESTABLISH A TRUST?

Assets usually include your:

ARE THERE ANY EXCEPTIONS TO THE LAW ON TRUSTS?

The law does not apply to:

We will also not count the trust if counting it causes you hardship, and you meet the undue hardship criteria.

Certain revocable trusts under Section 1917(d)(4)(A) or (C) of the Social Security Act may still count as your resource.

HOW DOES MONEY FROM A TRUST THAT IS NOT MY RESOURCE AFFECT MY SSI BENEFITS?

HOW CAN I FIND OUT MORE ABOUT SETTING UP A TRUST?

We cannot tell you how to set up a trust. You may consult a lawyer or financial advisor to find out more about trusts.

Your local Social Security office has a list of groups that can find you a lawyer or give you free legal services if you qualify. You may also contact the State or local bar association or the Legal Services Corporation for legal assistance if you qualify.

Some trusts and trust payments that we do not count as your resources or income for SSI purposes can affect your Medicaid eligibility.

Contact your State if you need more information about how trust and trust payments can affect Medicaid eligibility.

THIS INFORMATION IS GENERAL.
FOR MORE INFORMATION, CALL 1-800-772-1213 (TTY 1-800-325-0778),
VISIT OUR WEBSITE ( www.ssa.gov ) ON THE INTERNET,
OR CONTACT YOUR LOCAL SOCIAL SECURITY OFFICE.