Elder Law - Len and Rosie

Guarding benefits for the disabled

Dear Len & Rosie,

I am the Representative Payee for a neighbor. He is disabled and receives Social Security and Supplemental Security Income Benefits plus Medicare. Recently his father died and he is a beneficiary to the will. I have no idea how much money will be received, but this man seems to think it will be a considerable sum.

Recently I heard you discuss a similar situation on your radio program with a woman and you told her she could go to the court and have a “d4A” trust prepared in order to protect her inheritance and still receive her Social Security benefits.

Who do I speak to create such a trust? At this point in time, neither he nor I have money to hire a lawyer so is it possible for me to do this on my own?


Dear Sharon,

In estate planning, there are two types of special needs trusts. The one that your friend should have had is a third party special needs trust created as part of his deceased father’s will or trust. If his father had taken care of this while he was alive, your friend would be better off, especially because a special needs trust created with someone else’s money (his father’s) would not have to reimburse the Department of Health Care Services for Medi-Cal benefits paid on your friend’s behalf. But that’s all water under the bridge.

The other type of special needs trust is a first party special needs trust, created with the beneficiary’s own assets. A “d4A” special needs trust is shorthand for a trust created under 42 U.S.C. section 1396p(d)(4)(A) — the specific code section in federal law that authorizes the creation of these kind of trusts. The good news about d4A trusts is that if your friend gets one, his inheritance will not cause him to lose eligibility for SSI, Medi-Cal, and other needs-based public benefits.

The bad news about d4A trusts is that they must include a provision requiring the trustee to pay off Medi-Cal after your friend’s death before distributing what’s left to the beneficiaries named in the trust. Also, these trusts must be created by a living parent or grandparent, or by an order of the court.

It’s not surprising that your friend doesn’t have the money to pay a lawyer to petition the court to create his special needs trust. His income from SSI is hardly enough to pay for his basic needs. But the lawyer fees can be paid from your friend’s inheritance after the trust is created. The procedure to go about creating the trust is a bit complicated, and we doubt that you’re going to find out how to do it in any self-help book. See a trusts and estates attorney.

But before you and your friend do this, he should think about whether or not he needs a special needs trust. If his inheritance is large enough, and he also has Medicare benefits, he may wish to accept his inheritance outright, drop his SSI benefits, and live off of his inheritance without the restrictions of a special needs trust.

And for the rest of our readers out there, take this as a lesson. If you have a disabled family member, you should consider creating a special needs trust for his or her benefit as part of your own estate plan.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 707.996.4505 or Lentillem.com.

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