A Special Needs Trust is an estate-planning tool that allows resources to be dedicated for the benefit of a disabled person (beneficiary) without endangering that person’s qualification for government benefits. Assets placed in the trust are considered property of the trust rather than the beneficiary. Proper distributions and assets in the trust do not determine eligibility for government benefits.

Supplemental Security Income (SSI) is a means-tested federal cash-assistance program, intended to pay for an individual’s food, shelter and clothing. Eligibility is tied to the disabled person’s income and assets. A significant benefit of SSI is that it automatically makes a recipient eligible for Medicaid. If a disabled person receives a windfall, such as an inheritance or a settlement, that person is likely to lose their means- tested government benefits until the amount received has been “spent down”, generally to below $2,000. To avoid this loss of eligibility for benefits, disabled individuals can use these assets to fund a Special Needs Trust.

There are several types of special needs trusts, most commonly in the form of Third Party Special Needs Trusts, so-called because they are set up and funded by third parties, such as parents, grandparents, or guardians. Third Party Special Needs Trusts generally become active (i.e., funded) upon the death of the grantor(s) but can also be active at creation or at any point while the grantor(s) are living (inter-vivos).

Unlike the Third Party Special Needs Trust, a First Party Special Needs Trust is funded with the disabled beneficiary’s own assets (thus, “First Party”). First Party Special Needs Trusts are particularly useful for a disabled client who has received a “windfall” from an inheritance or an insurance, litigation, or divorce settlement or award. First Party Special Needs Trusts are active immediately upon funding.

It is imperative that the trustee making the decisions has knowledge regarding the particular needs of the disabled person who is to benefit from the trust as well as how to protect the beneficiary’s qualification for government benefits. As a trustee, Proxy Parent Foundation brings very personal knowledge of the needs of its disabled beneficiaries. Both Third Party and First Party Trusts may be enjoined to the Proxy Parent Foundation PLAN of California Master Pooled Trust. Binder and Co. provides day-to-day accounting administration of the Master Pooled Trust. Lindbrook Capital, LLC provides investment management under the oversight of the Proxy Parent Foundation Trust Oversight Committee.