If a child has a disability, he or she may qualify for special programs such as Medi-Cal or SSI. These programs typically require that the child have very little or no assets in order to qualify. Sometimes, the government entity even keeps track of the value of the benefits provided.
When the parents die, they may leave assets directly to the child or in an irrevocable trust for the needs of the child. Either way, the child will be disqualified from the program that he or she is on if the program requires him or her to have very little or no assets. Sometimes, the government entity may seek to recover from the inherited assets the value of benefits previously provided.
The parents can create and transfer their assets to a revocable trust to avoid probate. The trust can provide that the child’s share of the assets pass to a special needs trust. Such a trust says that the child can only get benefits from the trust for things that are above and beyond the benefits that he or she is entitled to from the government program.
Using a special needs trust to hold assets earmarked for a child with a disability is a way to prevent the child from becoming disqualified from a government program when the parents have died because the special needs trust will not be considered a resource of the child.