Navigating the complexities of a special needs trust requires careful consideration of what constitutes appropriate distributions, and the question of including media subscriptions designed to enhance cognitive function is a valid one. These trusts, often established under Section 1996 of the Social Security Act, are designed to supplement, not supplant, public benefits like Supplemental Security Income (SSI) and Medicaid, while providing for the beneficiary’s quality of life. The key lies in ensuring that such expenditures do not jeopardize the beneficiary’s eligibility for these crucial programs.
What Expenses Can a Special Needs Trust Cover?
Generally, a special needs trust can cover expenses that enhance a beneficiary’s life *beyond* what public benefits provide. This includes things like therapies not covered by Medicaid, recreational activities, adaptive equipment, and even personal care items. However, the IRS and Social Security Administration scrutinize distributions to ensure they don’t create a resource that would disqualify the beneficiary from receiving benefits. Distributions must be for the “sole benefit” of the beneficiary. In California, as in many states, assets acquired during a marriage are considered community property, owned 50/50, and a well-crafted trust is crucial for managing these assets and preserving benefits. The “double step-up” in basis for the surviving spouse provides a significant tax benefit that should be part of a comprehensive estate plan.
Are Media Subscriptions Considered “Sole Benefit”?
Media subscriptions aimed at cognitive improvement – think brain training apps, educational streaming services, or audiobooks – fall into a gray area. If the subscription is demonstrably linked to a therapeutic goal outlined in the beneficiary’s care plan – for example, a speech therapist recommends a specific language learning app – it’s far more likely to be considered a permissible expense. Documentation is paramount. The trustee must maintain meticulous records connecting the expense to the beneficiary’s needs and therapeutic recommendations. Formal probate is typically required for estates over $184,500, and the associated statutory fees can be substantial – often a percentage of the estate’s value. Avoiding probate through a properly funded trust can save significant money and time.
A Story of Careful Planning
I recall working with a client, Robert, whose adult daughter, Emily, had Down syndrome. Emily enjoyed music and benefitted from auditory stimulation that aided her cognitive development. Robert wanted to include a subscription to a streaming music service within Emily’s special needs trust. Initially, there was concern about whether this would be deemed a non-allowable expense. However, we collaborated with Emily’s therapist, who provided a letter specifically recommending the service as a therapeutic tool to improve Emily’s language skills and memory. This documentation was crucial. The trustee was then able to confidently make distributions for the subscription without jeopardizing Emily’s benefits.
When Things Went Wrong: A Cautionary Tale
Unfortunately, I also consulted with another family where a trustee made distributions for numerous entertainment subscriptions – including streaming video and gaming – without any supporting documentation. The beneficiary, David, had autism and enjoyed these activities, but there was no evidence connecting them to any therapeutic goals. Social Security flagged the distributions as potentially disqualifying, leading to a lengthy audit and a suspension of benefits until the trustee could demonstrate that the expenses were truly for David’s benefit. This resulted in significant stress and financial hardship for the family. In California, a formal will must be signed and witnessed by two people simultaneously, or it can be a holographic will entirely in the testator’s handwriting – demonstrating the importance of proper legal documentation.
Trustee Responsibilities and the California Prudent Investor Act
Trustees of special needs trusts have a fiduciary duty to act in the beneficiary’s best interest. This includes exercising prudence in managing trust assets and ensuring that distributions comply with all applicable laws and regulations. In California, trustees are guided by the “California Prudent Investor Act,” which emphasizes diversification and a long-term investment strategy. A trustee considering a media subscription should ask: Is this expenditure consistent with the beneficiary’s care plan? Is it demonstrably beneficial? Can I document the therapeutic value? And, will it impact the beneficiary’s public benefits? No-contest clauses in trusts and wills are narrowly enforced in California, only applying if a beneficiary contests the document without “probable cause.”
What Happens If There’s No Will?
If a special needs individual does not have a will or trust, their assets will be distributed according to California’s intestate succession laws. In this scenario, the surviving spouse would inherit all community property, but separate property would be divided between the spouse and other relatives based on a set formula. This can be problematic, as the funds may not be properly managed for the beneficiary’s long-term care. An estate plan should also grant explicit authority for a fiduciary to access and manage digital assets, such as email and social media accounts.
43920 Margarita Rd ste f, Temecula, CA 92592Remember, careful planning and documentation are essential when managing a special needs trust. While media subscriptions designed to improve cognitive function *can* be permissible expenses, they must be carefully evaluated and supported by evidence of therapeutic benefit.
Steven F. Bliss ESQ. can help navigate the complexities of special needs trusts and estate planning. Call (951) 223-7000 today for a consultation.
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