Special Needs Trusts and Estate Planning


Waterson Huth & Associates




We have extensive experience in creating Special Needs Trusts for our clients. A Special Needs Trust allows an individual with disabilities to receive additional assets without losing their eligibility for public assistance programs.

The Attorneys at Waterson Huth & Associates understand the unique questions and concerns that you may have when you begin planning for your financial future. This is especially true if you or a family member has special needs. We take the time to help you identify your family’s needs and to offer solutions to meet those needs.

It is important for parents (or caregiving adult children) to plan for their own future as well as planning for their loved ones with special needs. Who will take care of your finances if you are unable to do so? Who has authority to give medical consent for you if you are incapacitated? Have you nominated a guardian for your minor children or a successor conservator for your adult child with disabilities? Will your loved one with special needs lose his or her public benefits because of a direct inheritance when you pass away? Have you considered establishing a Special Needs Trust or an ABLE (CalABLE) Account? If you are the primary caregiver for an individual with special needs, have you planned for the time when you are no longer able to do so? When is the last time you reviewed your beneficiary designations on your life insurance policy or retirement plan? 

Waterson Huth & Associates will help you navigate all of these issues so that your estate plan meets the unique needs of your family.

Waterson Huth & Associates will help you navigate all of these issues so that your estate plan meets the unique needs of your family.

Estate planning by parents who have children with disabilities involves many challenges, including the following:

  • How do you leave funds for the benefit of the child without causing the child to lose important public benefits?
  • How do you ensure that the funds are well managed?
  • How do you ensure that your other children are not over-burdened with caring for the disabled sibling, and that any burdens fall relatively evenly among the siblings?
  • What is fair in terms of distributing your estate between your disabled child and your other children?
  • How do you make sure there’s enough money to meet your disabled child’s needs?

The answer to many of these questions is a “Special Needs Trust.” Such trusts fulfill two primary functions: The first is to manage funds for someone who may not be able to do so himself or herself due to a disability. The second is to preserve the beneficiary’s eligibility for public benefits, whether that be Medicaid (MediCal), Supplemental Security Income (SSI), public housing, or any other program. Special Needs Trusts come into play in a multitude of situations, including parents planning for a disabled child’s future, a disabled individual coming into an inheritance or winning or settling a personal injury claim, or one spouse planning for a disabled spouse.

Each situation and each benefit program has its own rules which affect the drafting, funding and administration of special needs trusts. The public benefit programs in many ways track the treatment of trusts in terms of creditor protection. Just as you generally cannot create a trust for your own benefit and protect the trust funds from creditors, you usually cannot create a trust for your own benefit and have the funds uncountable for purposes of Medicaid, SSI and other public benefits programs.

However, Medicaid (Medi-Cal) and SSI have provided for “safe harbors” that permit the creation of self-settled supplemental needs trusts in certain circumstances. These are often referred to as (d)(4)(A), or “payback” trusts referring to the enabling statute and the requirement that at the death of the beneficiary the state be paid back its Medicaid expenditures on his/her behalf to the extent sufficient funds remain in the trust.

So-called “third-party” special needs trusts are usually created by parents and grandparents for the benefit of children and grandchildren with disabilities. These can be much more liberal than the statutory self-settled special needs trust and do not need to include a payback provision.

For more information about special needs planning in general and special needs trusts in particular, contact our office today.

You have completed your Estate and Special Needs Planning … Now what?

Transition Planning: 

Once you have completed the steps of meeting with a special needs planner and establishing an appropriate special needs plan, you might think that your interaction with your lawyer is over. After all, you have got a plan! But as we all know, plans change, so it’s important to stay in close contact with your special needs planner throughout your life. In case you have not thought of checking in with your special needs planner in a while, here are five events that should trigger an immediate call to your attorney.

1. Your Family Member with Special Needs Is Turning 18

Once your family member hits the age of majority, you will no longer be able to make a lot of the decisions that you have probably been making for him during his childhood. Your special needs planner can discuss various options to help you through this transition, including the preparation of health care proxies and durable powers of attorney, if your family member is competent, or consider conservatorship if he/she is not. But in no case should you simply ignore the problem.

2. You Move to Another State

Although some federal benefit programs like Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) have national rules, there can be smaller details that apply at the state level. Likewise, there are usually significant variations in how state Medicaid programs are run. Therefore, if you move to another state, you have to speak with a special needs planner who is familiar with local rules and programs, and not just rely on your old plan.

3. Your Financial Situation Changes

If you were making a lot of money and now you are not, or vice versa, your special needs plan is probably going to change. Assumptions about how to fund a special needs trust may go out the window. If your income becomes drastically lower, it may be time to consider using life insurance to fund a trust in place of other assets. On the other hand, if you are earning much more, you may have to consider tax planning strategies that you didn’t have to worry about before. In either case, a call to your planner is definitely in order.

4. You Retire, Become Disabled or Pass Away

When the parent of a child who has had a disability that manifested while the child was still young retires, becomes disabled or dies, the child may qualify for benefits on the parent’s work record. If you retire or become disabled yourself, call your planner immediately. Obviously, if a person who creates a special needs plan dies, there is going to be a lot of work to do to implement the next stages of that plan.

5. The Person with Special Needs Health Changes

Sometimes people who were previously ill become better and no longer need a restrictive special needs plan. Often, they get worse and need additional planning. In all cases, if the beneficiary of your special needs plan dies, there will be a lot of work to do, including the potential payoff of government liens and the disposition of trust assets or the amendment of your special needs plan. Once again, if the beneficiary’s health changes, your plan is going to have to change too. Your planner can walk you through all of the available options.

A Final Look:  Do you have everything you need?

If your child has special needs, a standard estate plan — will, trust, power of attorney, and health care proxy — may not be adequate for your family. If your child will not be able to support herself or live independently as an adult, you need to make special provision for her in your estate plan. Here are three must-have documents:

  1.  Special Needs Trust. Instead of leaving your estate directly to a disabled child, the funds should be left in a specially-drafted trust for the child’s benefit. This will ensure that the funds are properly managed for the child’s lifetime and provided that the trust is properly administered, the trust funds will not be countable, which helps to preserve your child’s eligibility for public benefits such as SSI and Medicaid.
  2. Guardianship/Conservatorship Nomination. Your Will should include a guardianship nomination for all of your minor children. But when your child turns 18, he/she is considered to be an adult by law, even if her/his disabilities are very severe. Taking the time to select a conservator for your disabled child reduces stress and uncertainty for other family members after your death: the person you nominate as conservator will typically be given preference by the court.
  3. Letter of Intent. This is a non-binding document that captures vital information about your child for future caregivers and trustees. It can include information about your child’s routines, preferences, medical history, allergies, and so on. As parents, you have gathered a lifetime’s worth of information about your child, information that will be invaluable to your child’s future caregivers. As your attorneys, we will keep a copy of the Letter of Intent with your other estate planning documents.

Contact us for more information regarding Special Needs Planning, Estate Planning, Special Needs Trusts, or ABLE (CalABLE) accounts.

For Consultation

Waterson Huth & Associates is here to help. If you, a family member, or loved one needs an attorney to help navigate issues in the areas of Transition Planning, Conservatorship, Guardianship, Special Needs Trust, Estate Planning or Special Education, call us to schedule an appointment or complete the form below.