Keep Your Loved One's Benefits Intact — Without Leaving Their Future to Chance

A special needs trust is one of the most consequential documents a family can create. Done right, it provides lasting financial support for a person with a disability without disqualifying them from Medi-Cal, SSI, or other government benefits they depend on. Done wrong — or skipped entirely — even a modest inheritance can trigger a benefits cutoff that takes months or years to reverse. I help San Diego families get this right the first time.

What a Special Needs Trust Actually Does

A special needs trust (also called a supplemental needs trust) holds assets for the benefit of a person with a physical or cognitive disability while keeping those assets invisible to benefit-eligibility calculations. Government programs like Supplemental Security Income (SSI) and Medi-Cal impose strict asset limits — typically $2,000 for an individual — and a direct inheritance or gift that exceeds that threshold can suspend benefits immediately. Assets held inside a properly drafted special needs trust do not count toward those limits. The trust can then pay for things government programs don't cover: a vehicle, travel, education, technology, recreation, and personal care items that meaningfully improve quality of life.

Third-Party vs. First-Party: Which Type Does Your Family Need?

The structure of the trust depends on whose money funds it, and confusing the two types is a common and costly mistake.

 

A third-party special needs trust is funded with assets belonging to someone other than the beneficiary — typically a parent, grandparent, or sibling. This is the most common type for families doing proactive estate planning. There is no payback requirement when the beneficiary passes away; remaining assets can go to other family members or charitable beneficiaries you name.

 

A first-party special needs trust (also called a self-settled or (d)(4)(A) trust) is funded with assets that belong to the person with the disability — most often a personal injury settlement, an inheritance received directly, or accumulated savings. Federal law requires that upon the beneficiary's death, the state Medicaid agency must be reimbursed for benefits paid before any remaining assets pass to others.

 

Choosing the wrong type — or drafting one type when you need the other — can create serious benefit disruptions or unintended payback obligations. I take the time to understand your family's full picture before recommending a structure.

What the Trust Can and Cannot Pay For

The trustee's spending decisions are what keep the trust in compliance over time. Distributions must supplement government benefits, not replace them. If the trust pays for something a government program would otherwise cover — food and shelter, in most cases — that payment can reduce the beneficiary's SSI benefit dollar for dollar.

 

Permissible distributions typically include:

 

  • Assistive technology, computers, and communication devices
  • A vehicle and transportation costs
  • Education, tutoring, and vocational training
  • Recreation, entertainment, and travel
  • Personal care attendants beyond what Medi-Cal covers
  • Home furnishings and household goods
  • Legal and financial services

 

I draft each trust with clear distribution guidance so the trustee — whether that's a family member or a professional fiduciary — understands exactly where the lines are.

Naming the Right Trustee

Choosing a trustee for a special needs trust is a different decision than choosing one for a standard living trust. The trustee must understand benefit rules, keep meticulous records, make judgment calls about permissible distributions, and file required accountings — all while maintaining a relationship with a beneficiary who may have limited ability to advocate for themselves.

 

Family members often serve as trustees and can do so effectively with proper guidance. In other situations — particularly when no family member is well-positioned to serve, or when the beneficiary's needs are complex — a professional fiduciary or nonprofit trustee is the better choice. I can walk you through both options and help you think through successor trustees as well, so the trust continues to function if your first-named trustee is unable to serve.

Coordinating the Trust with the Rest of Your Estate Plan

A special needs trust doesn't exist in isolation. For it to work as intended, the rest of your estate plan must route assets to the trust — not directly to the beneficiary. That means updating your will, your living trust, and beneficiary designations on retirement accounts and life insurance policies to name the special needs trust (not the individual) as the recipient.

 

I handle estate planning for the whole family, which means I can draft the special needs trust and coordinate it with your living trust, pour-over will, and any other documents in a single engagement. Families who create the trust but forget to update their beneficiary designations often defeat the entire purpose — I make sure that doesn't happen.

Why San Diego Families Work with Me on This

  • Will a special needs trust affect my child's SSI or Medi-Cal eligibility?

    A properly drafted third-party special needs trust will not count as an available asset for SSI or Medi-Cal eligibility purposes. The key is that the trust must be structured correctly from the start — assets held in the trust are not considered the beneficiary's property under federal benefit program rules. An improperly drafted trust, or a direct inheritance, can trigger a benefits disruption.

  • Can I add a special needs trust provision to my existing living trust?

    Yes. Many families add a special needs sub-trust as a built-in provision within their revocable living trust, structured to activate if a beneficiary has a disability at the time of distribution. This approach keeps your plan consolidated and avoids the need for a separate standalone document in every case. Whether a sub-trust or a standalone trust is the right fit depends on your family's specific circumstances.

  • What happens to the money in the trust when my child passes away?

    For a third-party special needs trust — the type funded with a parent's or grandparent's assets — remaining funds pass to whoever you name as remainder beneficiaries, with no state payback requirement. For a first-party trust funded with the beneficiary's own assets, California's Medi-Cal program must be reimbursed for benefits paid during the beneficiary's lifetime before any remaining assets pass to others.

  • How much does it cost to set up a special needs trust in San Diego?

    Cost depends on whether you need a standalone trust, a sub-trust provision within an existing plan, or a full estate plan built around the special needs trust. I provide a clear, honest estimate during your free consultation — before you commit to anything. There are no hidden fees and no pressure.

  • My family member received a personal injury settlement. Is it too late to protect their benefits?

    Not necessarily. A first-party special needs trust can be funded with settlement proceeds and still preserve eligibility, provided it is established and funded correctly and meets the federal requirements under 42 U.S.C. § 1396p(d)(4)(A). There are timing considerations and court-approval requirements in some cases, so it's important to act quickly. Contact me as soon as possible so we can assess your options before any funds are distributed directly to the beneficiary.

Schedule a Free Consultation

Special needs planning requires an attorney who handles this work regularly and stays current on benefit program rules — SSI income and asset limits, Medi-Cal eligibility standards, and the federal statutory requirements for trust drafting under 42 U.S.C. § 1396p(d)(4). I've been practicing estate planning in San Diego since 2012, and I handle every matter personally. You won't be handed off to a paralegal or a junior associate after the first meeting.

 

My office is in Point Loma, and I work with families throughout San Diego, including La Jolla, Coronado, Mission Hills, Ocean Beach, and Pacific Beach. I offer a free, no-obligation consultation so you can ask questions and understand your options before making any decisions.

 

If someone in your family has a disability, the time to plan is before an inheritance, a settlement, or a change in circumstances forces the issue. I offer a free, no-obligation consultation at my Point Loma office — or by phone — so you can get clear answers and a realistic picture of what a special needs trust would look like for your family. Call 619.994.1215 or use the link below to get started.