Effect of Trusts on Public Benefits
Supplemental Security Income (SSI) and Medi-Cal are both needs based programs which are available to people with a developmental disability. To be eligible to receive benefits under these programs, the applicant must meet certain asset and income tests. In certain circumstances, assets held in a special needs trust, like the Master Trust of California, will not be treated as an asset of the individual and the trust income will not be treated as income of the Beneficiary.
For SSI and Medi-Cal consideration, trusts fall into two categories; trusts created with the assets of the individual and trusts created with assets of others. The latter are usually trusts funded from the estate of a parent or family member. In these cases the Social Security Agency will scrutinize the trust document for specific language regarding the accessability of the trust by the Beneficiary and how and when distributions can be made from the trust. Generally, if the trust is irrevocable and the Trustee has full discretion in making distributions from the trust, the trust will not be considered an asset of the individual Beneficiary.
Sometimes trusts are established with the assets of the Beneficiary. This happens, for example, when the Beneficiary receives an award from a lawsuit settlement, a retroactive Social Security award, or an inheritance which was bequeathed to the Beneficiary (instead of a trust). In these cases certain prerequisites must be met which are enumerated in Federal and State law.
• United States Code, Title 42, Chapter 7 (Social Security), Subchapter XIX, Section 1396p
• California Code of Regulations, Title 22 (Social Security), Division 3, Subdivision 1, Chapter 2, Article 9, Section 50489,
Trusts
• California Probate Code, Chapter 4, Article 1, Section 3600 to 3605
Generally, trusts established with the assets of the Beneficiary will not be considered an asset of that Beneficiary if the following criteria are met:
• The trust is established and managed by a non-profit association.
• A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.
• Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c(a)(3) of Title 42) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.
• To the extent that amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to certain government benefits paid on behalf of the Beneficiary.
The Master Trust of California has been found to meet the first three of the above criteria and there is an election in the Joinder Agreement that, if chosen, meets the fourth criteria.