Category Estate Planning & Probate

Trusts For People With Disabilities

A primary planning tool for a person with a disability is a carefully drafted trust that prevents the assets of the trust from disqualifying the person from receiving public benefits.

1. Is a Trust Necessary? 
A trust can be a beneficial planning tool to preserve assets for the benefit of a person with a disability. If an individual’s only public benefits are entitlement programs such as Social Security Disability Insurance and Medicare, a trust may not be necessary. If, however, a person with a disability is receiving need-based benefits such as SSI or Medi-Cal or may reasonably be expected to need such programs in the future, a trust is the primary means to preserve the public benefits and allow for additional assets to be held and used for the individual’s future needs. Otherwise, the individual may become ineligible for public benefits until the additional assets are spent or given away (which would also cause a period of ineligibility). Other than placing assets in a trust, the other alternative is to purchase assets that are not counted for purposes of need-based benefit requirements. However, this does not provide additional funds to supplement public benefits. In addition, if funds are needed and the exempt assets are sold, the proceeds could again trigger benefit ineligibility until spent.

2. Trusts For People With Disabilities.
Trusts for people with disabilities fall into two basic categories: (1) first party trusts; and (2) third party trusts. Although within each category there are variations, the basic structure is that assets are transferred into trust for the benefit of a beneficiary with a disability. A third party serves as trustee and the beneficiary has no control over disbursements from the trust. The distinction between a first party trust and a third party trust is where the assets to fund the trust originate.

A.  The first party trust is a trust that allows a person with a disability to transfer his or her own assets into the trust without being penalized under need-based public benefit programs. The most prominent feature of this type of trust is the requirement that the State be reimbursed from the trust’s remaining assets on the beneficiary’s death. The State must “receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan.” The reimbursement requirement applies only to Medi-Cal benefits paid, not to SSI benefits.

B.  A third party trust is established with the assets of someone other than the person with a disability. Unlike the first party trust, there is no reimbursement requirement. The third party trust also has the advantages of allowing the person setting up the trust (the “settlor”) a great deal of flexibility in structuring the trust including:

  • Providing for distributions to or for the benefit of multiple beneficiaries, including beneficiaries without disabilities;
  • Establishing an advisory committee to oversee and make recommendations regarding the care of the beneficiary with a disability;
  • The ability to use trust funds to hire caregivers, case managers, advocates and attorneys for the beneficiary with a disability; and
  • Controlling the final distribution of any assets remaining after the death of the beneficiary with a disability.

The key to a third party trust is ensuring that the trust assets are not includible as assets or income of the beneficiary. A carefully drafted third party trust can allow a parent or relative to provide for the lifetime care and advocacy of a person with a disability without causing him or her to lose public benefits.

3. What kinds of benefits can be provided by a third party trust for a beneficiary with a disability?
The trustee is generally directed to make expenditures to maintain the beneficiary’s good health, safety, and welfare when these are not being provided by any public agency. This commonly includes basic living needs such as dental care, medical care, custodial care, support services, and similar care not provided by public benefit programs. In addition, distributions are also commonly authorized for goods and services such as:

  • Clothing, bedding, and furniture;
  • Telephone, Internet, and cable or satellite television;
  • Audio, video and computer equipment;
  • Newer or more effective medications than allowed by Medi-Cal;
  • More sophisticated medical or dental or diagnostic work or treatment for which funds are not otherwise available;
  • “Nonessential” medical procedures (such as massage therapy or acupuncture);
  • Periodic outings and vacations; and
  • Any other items to enhance the beneficiary’s quality of life, self-esteem, or situation. If set up correctly, a trust can provide additional comfort and care to enhance the quality of life of a person with a disability, without causing a loss of public benefits.

If you would like further information about a trust for a person with a disability, please contact us at (916) 441-2430.

Conservatorships For People With Disabilities

1. What is a conservatorship? 
A conservatorship is a court proceeding through which a responsible person (called a conservator) is appointed by the court to care for another adult who cannot care for him/herself or his/her finances (called a conservatee).

2. What is a Limited Conservatorship?
A “Limited Conservatorship” is a special type of conservatorship intended specifically for a person with a “developmental disability.” The goal is to encourage the limited conservatee’s maximum self-reliance and independence. As such, the limited conservator is generally only granted those powers that are necessary to aid the limited conservatee in those areas in which the limited conservatee needs assistance.

3. Who determines if a person has a “developmental disability”?
Generally, the Regional Center will determine if a person is developmentally disabled. If the person is a client of the Regional Center, then he or she automatically qualifies. Otherwise, the Regional Center will assess the individual to determine if he or she has a developmental disability.

4. What kinds of powers can a limited conservator be granted?
People with developmental disabilities can usually do many things on their own. As such, the limited conservator is only granted powers to do things the limited conservatee cannot do without help. The powers that the limited conservator may be granted are generally limited to the powers to:

Fix the residence or specific dwelling of the limited conservatee;

 Access confidential records and papers of the limited conservatee;

 Consent or withhold consent to the marriage of, or the entrance into a registered domestic partnership by, the limited conservatee;

 Contract on behalf of the limited conservatee;

 Give or withhold medical consent on behalf of the limited conservatee;

 Control social and sexual contacts and relationships of the limited conservatee; and

 Make decisions concerning the education of the limited conservatee.

However, because the court will only grant those powers that are necessary to aid the limited conservatee, not all these powers are granted in every case. For example, it is uncommon for the court to grant the limited conservator the power to control relationships of the limited conservatee unless the limited conservatee has shown that he or she makes poor choices that put him or her in danger, such as being in abusive relationships.

5. Who can be appointed as limited conservator?
Although any responsible adult can act as a limited conservator, limited conservators are usually parents or siblings of the person with the disability. It is also possible to appoint more than one person as limited conservator at the same time. In fact, it is a good idea to have at least one parent and a sibling or other relative act as co-limited conservators. That way, if one co-limited conservator dies or becomes incapacitated, there is still a limited conservator in place. Otherwise, a new limited conservator would have to be appointed through court proceedings.

6. Can I avoid court proceedings by naming a limited conservator for my child in my Will or living trust ?
No. Only the court can appoint a limited conservator.

7. What if I decide not to establish a limited conservatorship?
In most cases, adults with development disabilities are not able to give informed consent for medical treatment or to sign contracts. As such, if a limited conservatorship is not established, the director of the Regional Center has the authority to make most of the decisions for the adult with development disabilities. including decisions regarding residence, medical care, and contracting for services.

8. When should I apply for limited conservatorship?
If you are trying to establish a limited conservatorship for someone who will soon be 18, it is a good idea to start the process more than 3 months before his or her 18th birthday. A limited conservatorship is a court proceeding and it takes time to gather reports and hold court hearings before the limited conservator is actually appointed.

9. If I am a limited conservator, do I also need a conservatorship of the estate?
Generally, you do not need a conservatorship of the estate if the limited conservatee gets only public assistance, like Supplemental Security Income (SSI) or Social Security (SSA) but has no other assets. But, you will need a conservatorship of the estate if the limited conservatee has other assets, like an inheritance or a settlement from a lawsuit that is not in a trust for a person with a disability.

10. Does the court supervise the limited conservator?
Yes. Generally, a court investigator will review the case one year after the conservatorship is granted, then every 2 years after that. The review will include discussion with the limited conservator and a visit with the limited conservatee. If a conservatorship of the estate is established, the conservator will be required to file an annual report with the court to show how the money in the conservatorship is being managed and spent.

If you would like further information about limited conservatorships, please contact us at (916) 441-2430.