A trust that supports a disabled beneficiary without taking their benefits away.
A special needs trust holds money for the benefit of someone with a disability while preserving their eligibility for SSI, Medi-Cal, and other means-tested benefits. The arithmetic is exacting: the wrong kind of distribution can cut benefits in the month it lands. Most general trust-administration practices do not handle SNTs correctly. We do.
When you'd come to us for this.
- A family member with a developmental or psychiatric disability is receiving SSI and Medi-Cal, the family has set up a third-party SNT to hold the inheritance, and the trust needs a trustee who understands the SSI in-kind support-and-maintenance rules.
- An adult with a disability received a personal-injury or medical-malpractice settlement, the settlement has been put into a first-party SNT under 42 U.S.C. §1396p(d)(4)(A) to preserve benefits, and the trust needs administration plus Medi-Cal payback tracking.
- An aging parent who has been the de facto trustee for an adult child with a disability can no longer manage the role — declining health, declining capacity, or simply the recognition that a professional successor is needed before something goes wrong.
- A trustee inherited the role of an SNT and is unsure whether the distributions they have been making are SSI-safe. A review and reset can repair a mismanaged situation without losing the trust's benefit-preserving structure.
What happens next.
1. The trust review. First-party SNT or third-party SNT? Self-settled or established by parent, grandparent, guardian, or court? Subject to Medi-Cal payback at the beneficiary's death, or not? The answer determines the distribution framework for the next several decades. We work from the trust document itself rather than from anyone's recollection of what it says.
2. The benefits map. SSI? SSDI? Medi-Cal? CalFresh? IHSS? Section 8? Each program has its own rules about what counts as income, what counts as resources, and what can be paid for without affecting eligibility. We map which programs the beneficiary is on and what each one tolerates.
3. The distribution framework. SSI tolerates payments the trustee makes directly to third-party vendors for goods and services other than food and shelter. Payments for shelter (rent, mortgage, utilities, property tax, homeowner's insurance) and food reduce SSI by one-third under the in-kind support-and-maintenance rule (POMS SI 00835). The math is calculable in advance. We model it before we make the distribution.
4. The ongoing administration. Bills are paid to vendors, not to the beneficiary. Records are kept that would survive a review by Social Security or Medi-Cal. Annual accountings are sent to the beneficiary (or representative payee) and, for first-party SNTs in California, often to the Department of Health Care Services. Regional Center coordination happens where applicable.
5. Medi-Cal payback at death (first-party SNTs). A first-party SNT under §1396p(d)(4)(A) must repay Medi-Cal for benefits received during the beneficiary's lifetime, up to the value of remaining trust assets. We track the running Medi-Cal expenditure throughout administration so the payback calculation is correct when the time comes. Third-party SNTs do not have a payback obligation.
What this costs.
SNT administration is billed hourly. The cost depends on the activity level: a stable arrangement where the beneficiary's life is steady and distributions are routine bills a few hours a month. An acute period (a hospitalization, a move, a benefit reapplication, a change of representative payee) bills many more.
Fees paid to the trustee from a special needs trust are administrative expenses of the trust. Under SSI POMS SI 01120.201, administrative expenses are not treated as income to the beneficiary and do not reduce SSI. The trust's distribution standards and the trustee's fee are separate questions; both are addressed in the engagement letter consistent with AB 1194 §6563.
Common questions.
Can the trustee just give the beneficiary cash?
Almost never. Cash given to an SSI beneficiary counts dollar-for-dollar as income in the month received and reduces SSI by the same amount. For amounts over the SSI federal benefit rate, it eliminates SSI for that month and may eliminate Medi-Cal eligibility along with it. The rule is that the trust pays vendors directly for the beneficiary's benefit; the beneficiary does not receive cash from the trust.
What if the beneficiary loses SSI for one month?
One month off SSI usually does not affect long-term eligibility, but it does interrupt Medi-Cal in California where the two are linked. Restoring the linkage takes a Medi-Cal reapplication — paperwork the beneficiary or representative payee has to complete. The simpler answer is to model the distribution in advance and avoid the interruption.
Does the family still need a special-needs-planning attorney?
Usually yes. The attorney drafted the trust and is the right person to interpret it when a question of legal construction comes up — or to modify it through court reformation if circumstances have changed. The fiduciary role is the operational side. The two roles are complementary.
Consultations are by appointment and held in strict confidence.
Or call 760-33-TRUST (760-338-7878) directly.
Discretion and confidentiality are fundamental to our practice. Information submitted through this form is kept private and used solely for purposes of communication regarding potential fiduciary services.
