Aug 12, 2004

Devries Column

Disabled persons may be helped by a special needs trust

This month’s question:
My husband and I have a disabled daughter, Sarah, age 12. Her mental condition is far below normal and it never will improve. How can we include her in our estate plan without just giving the money to the government? Won’t the government just take anything we designate for her? Is planning and thinking about this considered unpatriotic? How can we be fair to our two other children? Should we just disinherit Sarah?

Loretta L.
Almaden Valley

Dear Loretta:

I like to think that I am as patriotic as most Americans, but it seems to me you have a duty to yourself and to your other family members to formulate the best estate plan you can. What you might consider for your daughter is a “special needs trust.”

The purpose of a special needs trust is to preserve government benefits for disabled or aged beneficiaries. Many governmental programs for the disabled are “asset sensitive,” meaning eligibility for benefits may require the recipient to have resources and income below a certain level to qualify.

Typical benefits that your daughter may be receiving and others like her include Supplemental Security Income (SSI) and Medi-Cal which are the most important public benefits available to the disabled and aged. Both programs are need-based and are available only to those with minimal financial resources.

If the special needs trust is designed and administered properly, it can provide funds to supplement a disabled or aged beneficiary’s government benefits without interfering with government aid. A good way to look at it is that a special needs trust will supplement rather than supplant your disabled daughter’s governmental benefits.

Special needs trust are typically used in two settings: (1) estate planning for parents (or grandparents) with a disabled son or daughter; and (2) litigation when the proceeds of a settlement or judgment would cause the disabled person to lose his or her public benefits.

If you and your husband have a revocable living trust, you could include a special needs trust for your daughter within that same document. This would allow you to maintain flexibility to modify the trust if the law changes or there are other changes in your circumstances. In this manner also, you are not “disinheriting” her at all, but maximizing her net benefits as well as that of your other children.

Although a special needs trust is usually set up and funded by a parent or parents of a disabled child, it could be established by a grandparent, a sibling or another third party.

The special needs trust typically takes effect on the death of the surviving parent or parents. During the parent’s lifetime, he or she may wish to supplement the child’s public benefits when necessary.

Space in this column does not permit for a discussion of litigation special needs trusts, but many of the principals of that type of trust are the same as the special needs trust for the disabled.

And this column does not permit me to just insert a form to fill out and sign to create a special needs trust. It’s not quite that simple. You should have your own attorney review this matter with you and proceed from there.
Loretta, it seems to me that if you have a special needs trust for Sarah you are not only being very fair to your other two children as well as the rest of your family, but you are also being quite patriotic in the process.

Donald J. DeVries
Almaden Valley

Donald J. DeVries is an attorney practicing law in Almaden Valley. If you would like him to answer your question in his next Almaden Times column, you can reach him by e-mail at don@almadenvalleylawyers.com, fax at (408) 268-6502, telephone at (408) 268-9500, or mail at, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. Want to learn about a specific legal issue or how DeVries can help you? Visit his web site at www.almadenvalleylawyers.com. Almaden Times columns since 1986 are available there. DeVries writes this column to provide you with general information about important legal matters affecting California residents—not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.