Special Needs Trusts: A Primer

For many parents or guardians of people with special needs, there is one major overlying fear that colors everything they do for their charges: “what are they going to do once I’m gone?” The idea of their children relying on the state for the rest of their natural lives brings them dread, as funding can be pulled from any program at any time if the bureaucracy feels it’s necessary.

Enter the special needs trust, a legal fund that allows for a beneficiary to receive supplemental funds from the trust in addition to any benefits provided to by the state without being penalized. These specialized trusts manage assets provided by the donor for the use of the beneficiary that will allow them to receive the maximum number of benefits provided by the state while ensuring any future cuts to these programs will not send them into the street to fend for themselves.

There are three types of special needs trusts – the first-party trust, the third-party trust, and the pooled trust. First-party trusts hold assets that belong to the beneficiary, so items like inheritances or accident settlements. Third-party trusts holds funds belonging to other people who want to help the beneficiary. Finally, pooled trusts hold funds from a number of different beneficiaries, and act as a large source of money to draw from according to the needs of each beneficiary.

Special needs trusts exist due to governmental regulations surrounding what benefits people with special needs are entitled to that are based on their net worth. If you want to qualify for government assistance, the person with special needs can only have a set net worth – around $2,000 for the most common type of assistance. If the person receives an inheritance or accident payoff worth more than that, they are subject to taxes and immediately booted from the assistance program, no matter how long they can feasibly live off of that amount of money.

First-party trusts are subject to a ‘payback’ provision, where the government is reimbursed for the income generating assets being placed in the trust if the beneficiary dies. Third-party trusts allow for the assets and funds deposited to be redistributed back into the family if the beneficiary dies before the trust is fully paid out.

Pooled trusts are typically set up by charitable organizations that allow for the pooled resources of all beneficiaries to be reinvested for greater returns. These trusts hold each account separately so they can be pulled out at will. When the beneficiary dies, the funds and assets they own will be paid out to both the government and the charity that set up the trust.

If you have a family member who has special needs, either from an accident or from birth, it goes without saying that you want them well cared for during their life, even if you are not around to make sure of it. A special needs trust will ensured that, no matter what happens to you, your family member will not be forced out onto the street and will continue to live as good a life as is possible, given their circumstances.

If you are in the southern California area, we recommend the services of Burris Law Firm, who specialize in setting up trusts of all kinds. Ensuring your family members with special needs are well cared for after you are gone means finding a dependable trustee to manage the account, and Burris Law is second to none in this regard.

If you are interested in setting up a special needs trust, or any form of trust, contact Burris Law Firm at:

Burris Law


200 N Tustin Ave #110, Santa Ana, CA 92705