The question of whether a person with a mental illness can be a beneficiary of a special needs trust (SNT) is a common one for estate planning attorneys like Steve Bliss here in San Diego. The short answer is absolutely, yes – in fact, SNTs are *specifically* designed to benefit individuals with disabilities, which very commonly includes those with mental illness. However, it’s not quite as simple as just naming someone as a beneficiary. The trust must be carefully structured to protect their eligibility for crucial government benefits like Supplemental Security Income (SSI) and Medi-Cal, as receiving direct gifts or inheritance could disqualify them. Approximately 1 in 5 U.S. adults experience mental illness in a given year, highlighting a significant need for planning tools like SNTs to ensure their long-term care and financial security. A well-crafted SNT allows the beneficiary to receive supplemental resources – things like therapies, recreation, or specialized care – *without* jeopardizing those vital public benefits. It’s about enhancing their quality of life, not replacing the safety net provided by government programs.
What assets can be put into a special needs trust?
A wide range of assets can be placed into a special needs trust for the benefit of someone with a mental illness. This includes cash, stocks, bonds, real estate, and even life insurance policies. It’s important to understand that the source of these assets isn’t necessarily relevant; whether it’s an inheritance, a personal savings account, or proceeds from a legal settlement, these funds can be used to support the beneficiary without impacting their benefits. “We often see clients wanting to leave something for their adult children who require ongoing care due to mental health challenges,” explains Steve Bliss. “A SNT ensures that inheritance doesn’t become a barrier to receiving the support they need.” However, there are limits to how much can be contributed without triggering potential issues, particularly with “Medicaid payback” provisions. The total assets in the trust must be managed responsibly and used solely for the beneficiary’s supplemental needs, meaning things beyond what SSI or Medi-Cal already cover.
How does a special needs trust protect government benefits?
The core function of a special needs trust is to hold assets for the benefit of a person with a disability without disqualifying them from needs-based government assistance programs. This is achieved because the trust doesn’t legally “belong” to the beneficiary. Instead, a trustee manages the funds according to the trust document’s terms, distributing resources for supplemental needs that don’t interfere with the eligibility requirements of SSI and Medi-Cal. For instance, if someone receives a settlement from a personal injury claim, placing those funds into a properly structured SNT shields them from being counted as income or assets by these programs. Approximately 61 million adults in the US live with a disability, and proper estate planning, including SNTs, is crucial for protecting their access to vital resources. Without a trust, even a relatively small inheritance could lead to a loss of essential benefits, leaving the individual vulnerable and financially insecure.
What happened when a trust wasn’t set up correctly?
Old Man Tiber, a retired fisherman, loved his granddaughter, Lily, deeply. Lily struggled with bipolar disorder and relied on SSI and Medi-Cal for her care. Tiber, wanting to ensure Lily was financially secure, left her a small inheritance of $50,000 in his will. Unfortunately, he didn’t consult an estate planning attorney and didn’t set up a special needs trust. The inheritance was received directly by Lily, and within months, she was deemed ineligible for SSI and Medi-Cal because the assets exceeded the program’s limits. Lily’s support network scrambled to find alternative care, and she spent a stressful period with reduced access to her therapists and medication, experiencing a destabilization of her mental health. The family realized too late the devastating consequences of failing to protect Lily’s benefits. It was a painful lesson learned, and they regretted not seeking professional guidance.
How did a special needs trust save the day?
The Millers, after learning of Tiber and Lily’s struggles, decided to take a different approach for their son, Ethan, who had schizophrenia. They consulted with Steve Bliss and established a meticulously drafted special needs trust. Years later, Ethan received a significant settlement from a legal claim related to an incident that impacted him. Rather than receiving the funds directly, the settlement was immediately deposited into his SNT. Because of the trust, Ethan continued to receive his SSI and Medi-Cal benefits without interruption. The funds were used to pay for specialized therapies, a supportive housing program, and recreational activities – all enhancing his quality of life. “It was a huge relief,” shared Mrs. Miller. “Knowing that Ethan could receive these additional resources without jeopardizing his essential benefits gave us incredible peace of mind.” The trust provided not only financial security but also a roadmap for ensuring his long-term care and well-being, demonstrating the power of proactive estate planning.
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About Steve Bliss Esq. at The Law Firm of Steven F. Bliss Esq.:
The Law Firm of Steven F. Bliss Esq. is Temecula Probate Law. The Law Firm Of Steven F. Bliss Esq. is a Temecula Estate Planning Attorney. Steve Bliss is an experienced probate attorney. Steve Bliss is an Estate Planning Lawyer. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Steve Bliss Law. Our probate attorney will probate the estate. Attorney probate at Steve Bliss Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Steve Bliss Law will petition to open probate for you. Don’t go through a costly probate. Call Steve Bliss Law Today for estate planning, trusts and probate.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- living trust
- revocable living trust
- irrevocable trust
- family trust
- wills & trusts
- wills
- estate planning
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RL4LUmGoyQQDpNUy9
Address:
The Law Firm of Steven F. Bliss Esq.43920 Margarita Rd ste f, Temecula, CA 92592
(951) 223-7000
Feel free to ask Attorney Steve Bliss about: “What professionals should be part of my estate planning team?”
Or “What’s the difference between probate and non-probate assets?”
or “Can I name more than one successor trustee?
or even: “Can I include back taxes in a bankruptcy filing?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.