California has had a powerful impact on the evolution of the legal landscape of the nation as a whole. Third Party special needs trusts are a case in point. It was in the mid-1970s, long before other states, that California recognized the need for SNTs/Special Needs Trusts, and set about prioritizing legal protections for individuals with special needs.
Jubilee Menzies, an estate planning attorney at Laughlin Legal Divorce & Family Law Group in Silicon Valley, drafts third party special needs trusts and has an appreciation for the refinement of SNT’s over the years as a meaningful tool of protection. Ms. Menzies is passionate about helping parents navigate the legal landscape to safeguard the assets they designate for their children with disabilities. It’s work she values and does well.
Here are Ms. Menzies’ answers to just a few of the questions she regularly fields on the topic.
Q How does Family Code section 3910 relate to Special Needs Trusts in California? What does it cover?
JUBILEE MENZIES California Family Code 3910 mandates parental support of a child with special needs, regardless of the child’s age and including past the age of majority. The recent change to this law permits the court to direct that these support payments be paid directly into an SNT. SNTs are governed by both state and federal law and require compliance with both. They are a specific kind of trust that can help to supplement the needs of a person with disabilities and also preserve their eligibility for government benefits such as housing or medical care. In this context, an SNT works in conjunction with government programs to provide more robust support to people with disabilities.
Q Explain what it means to be a California special needs trust lawyer in California. What’s the difference between a first-party special needs trust in California and a third party special needs trust in California?
JUBILEE MENZIES Some of this needs to be contextualized. There are different kinds of special needs trusts. First-party special needs trusts are created for an individual who is disabled and has their own funds, and those have specific requirements. We, however, work with third-party special needs trusts. A third-party special needs trust is where another individual is setting aside assets to create a trust for the benefit of a person with disabilities, and they do so in a specific format that doesn’t compromise the eligibility of that individual, that beneficiary, for government benefits as well.
This is where the third party is using their funds on behalf of the child or the individual with special needs. It comes up most often in the context of parents or grandparents who want to provide for their child or grandchild, but they know that the child is not going to be able to support themselves. They’re not going to be able to work during their lifetime to fully support themselves financially, and so they create this specific kind of trust so that their child can receive healthcare. They can potentially receive housing. They can receive other types of benefits. And this type of trust will supplement those benefits that they have. A special needs trust is often also referred to as supplemental needs trust for that reason.
The process of creating this sort of trust is similar to foundational estate planning. You meet with a trusts and estates attorney to go over your goals and needs. The attorney can help you understand what types of support the trust can provide for a child, potentially an adult child, with disabilities, and help you set aside the amount of money you’re looking for, and help you draft things that are going to be in compliance with the law, and preserve that eligibility for for the person with disabilities. It’s often part of your larger estate planning process, a comprehensive plan where the family is looking to get all of their affairs in order, and part of that may be creating a special needs trust.
The special needs trust can be either created independently or as part of the family trust, for example. And another part of the considerations is whether there will be other sources of potential inheritance or funding for this trust.
The timing for preparing a special needs trust is similar to other types of trust preparation. With our office, it’s typically a meeting with an attorney to discuss your goals and your specific needs and values, and then the attorney will draft up the plan, send it to you for review, and then it needs to be executed, which we do in-house. We typically turn around something like this in four to six weeks, depending on client responsiveness.
Q Briefly, what kinds of issues are addressed in a special needs trust for a disabled child?
JUBILEE MENZIES First and foremost, these trusts are a vehicle for financial support. You need to be thinking about who can potentially manage the trust. Statistically speaking, parents are going to pass away before the child. So the child is likely going to need someone other than their parents to step in during the child’s lifetime. One of the biggest considerations is the successor trustee, who’s going to continue to manage the trust after the parents are no longer in a position to do that. It’s also a question of funding: How much is the child going to need throughout their lifetime? What are the sources of those funds going to be, and what types of support and enrichment do you want to be able to provide, whether it’s music or counseling or swimming class or social support and things like that.
Q Can a special needs trust for child support payments specifically address a special needs trust and government benefits? Can it allow for child support paid to a special needs trust in California?
JUBILEE MENZIES Yes, the support order can require that parents make support payments directly into their child’s special needs trust protecting that child’s eligibility for public benefits.
Public benefits are often a critical component of a special needs care plan even within families that have substantial means.
Parents often have to pay child support to the other parent. So instead of paying to that other parent, you’re paying into a special needs trust, which in some ways may be a longer term planning vehicle. Those support requirements may not stop when the child is of the age of majority. So if your child will never be able to support themselves, they’re still going to need parental support even when they’re 20 or 30 or 40, and the special needs trust continues beyond a similar support order for a minor child without disabilities.
This law authorized California parents to directly deposit monthly into the SNT instead of being paid as cash to the custodial parent, which previously could trigger the loss of crucial monthly SSI benefits because funds belong to the trust rather than to the child. They’re generally not counted as income. Trust funds do not replace government benefits when properly set up in this context.
Q Are you an advocate of setting up a special needs trust for divorce support payments?
JUBILEE MENZIES I think that a special needs trust can be an appropriate vehicle to use. It can be a useful tool, and it’s important to discuss that with your family law divorce attorney and look at all of the factors involved in what your family is trying to accomplish whether they’re going to be throughout the child’s lifetime, not just during minority, etc. They can be a very powerful tool for families and parents of children with special needs.
Q As a special needs trust attorney in California, what are your thoughts on special needs trusts vs conservatorship of the estate?
JUBILEE MENZIES They’re two very distinct things. A third-party special needs trust that we have been talking about is set up by another individual to provide assets to supplement the needs of a child or an adult with disabilities. Those assets are coming from someone else and they’re being used in a supplemental needs trust for their benefit.
A conservatorship of the estate may be necessary where the individual themselves has assets, and another party is controlling those assets because the individual lacks the capacity to do so. The comparison here would come more in the context of a first-party special needs trust versus a conservatorship of the estate, both of which are mechanisms by which a separate individual can legally control the assets of a person with disabilities who lacks the capacity to control their own assets. In our trusts and estates practice, we do not help create or manage first-party special needs trusts. They often come out of someone becoming disabled because of some sort of accident or injury, and they get a settlement payment. That amount is larger than they could have and still maintain access to government benefits like healthcare and housing and things like that. And so, a first-party special needs trust is set up. If it weren’t set up and the person’s assets were just conserved, they could lose access to government benefits.
Q Is it possible to avoid conservatorship with a special needs trust?
JUBILEE MENZIES Yes, when we are talking about conservatorship of the estate to manage assets. A first-party special needs trusts can be used to avoid a conservatorship of the estate. This is not to be confused with the need for a conservatorship of the person, which is a whole other topic.
If you’d like to learn more about it, you might be interested in reading our recently published blogpost, Limited Conservatorships: The Who, What, and When.
Are you searching for a Special Needs Trust lawyer in California for someone you love??
Laughlin Legal Divorce & Family Law Group is a premier estate planning law firm Bay Area with a collection of highly skilled Special Needs Trust attorneys who are trusted throughout California for their ability to understand and secure their clients’ needs and values for a better tomorrow.
Call us at 650.343.3486 to schedule your FREE 20-minute consultation. If you’d prefer, you can email us to set up your appointment. If we miss your call, we will respond promptly and call you back as soon as possible.
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