Yes, a special needs trust can absolutely invest in the stock market, but it requires careful consideration and adherence to specific rules to maintain eligibility for needs-based government benefits like Supplemental Security Income (SSI) and Medi-Cal. The primary goal of a special needs trust is to supplement, not supplant, these benefits, meaning the trust funds should enhance the beneficiary’s quality of life without disqualifying them from crucial assistance. Investing in the stock market, while potentially yielding higher returns than more conservative options, introduces complexities regarding income limits and asset thresholds. Approximately 65% of individuals with disabilities rely on government assistance for their basic needs, making preservation of those benefits paramount when structuring a special needs trust.
What are the risks of investing in stocks with a special needs trust?
Investing in the stock market carries inherent risks, including market volatility and potential losses. For a special needs trust, these risks are amplified because exceeding asset limits—currently $2,000 for SSI—can jeopardize benefits. Furthermore, income generated from investments, such as dividends and capital gains, is often considered “unearned income” and subject to strict limitations. In 2023, the SSI income limit for individuals was $973 per month; exceeding this amount can lead to a dollar-for-dollar reduction in benefits. A trustee must therefore carefully balance the potential for growth with the need to remain within these limits. Diversification and a long-term investment horizon are crucial strategies for mitigating risk. “It’s not about hitting home runs, it’s about consistent base hits that preserve and gently grow the trust funds,” as Steve Bliss often advises his clients.
How do you protect SSI and Medi-Cal benefits while investing?
A crucial strategy is establishing a “d(4)(a) trust,” a type of special needs trust that allows for the use of trust funds without impacting eligibility for SSI and Medi-Cal. This type of trust must be established with funds that rightfully belong to the beneficiary—perhaps from a personal injury settlement or inheritance. These funds aren’t counted as assets for benefit eligibility purposes. Another important tool is a “pooled trust,” where the trust joins a larger pool managed by a non-profit organization. This can reduce administrative costs and simplify compliance. “The rules surrounding special needs trusts are incredibly complex, and a seemingly small mistake can have significant consequences,” Steve Bliss emphasizes. “Professional guidance is essential.” It’s also worth noting that certain investments, like municipal bonds, may offer tax advantages that further protect trust funds and benefits.
What happened when a trust wasn’t properly structured?
I recall a case where a mother, Sarah, diligently saved for her son, David, who has Down syndrome. She wanted to ensure he had resources to supplement his care after she was gone. She created a trust, but without fully understanding the rules around SSI, she invested a significant portion in high-growth stocks. Initially, the investments performed well, but then the market crashed. David’s trust, which had once been above the asset limit, suddenly exceeded it, causing him to lose his SSI benefits. It was a heartbreaking situation – Sarah had intended to provide for her son, but her well-intentioned efforts had inadvertently harmed him. We were able to restructure the trust, divest the risky assets, and apply for a waiver, but it was a lengthy and stressful process, and David had a period of time where he didn’t receive the benefits he relied upon. This illustrates why careful planning and ongoing monitoring are critical.
How did careful planning create a positive outcome?
Recently, we worked with the Miller family, who were proactive in planning for their daughter, Emily, who has cerebral palsy. They established a d(4)(a) trust and consulted with a financial advisor specializing in special needs trusts. They created a diversified portfolio that included a mix of stocks, bonds, and real estate, carefully balancing risk and potential return. The trust was structured to distribute income strategically, ensuring it didn’t exceed the SSI limits. Over time, the trust grew, providing Emily with funds for therapies, specialized equipment, and enriching experiences that significantly improved her quality of life. She continued to receive her SSI and Medi-Cal benefits without interruption, allowing her to live a full and meaningful life. The Miller family’s story is a testament to the power of careful planning, expert guidance, and a commitment to securing a brighter future for a loved one with special needs. It’s a wonderful feeling to see these plans come to fruition and know that our clients are well-protected.
“It’s not just about preserving assets; it’s about preserving dignity and opportunity for individuals with special needs.” – Steve Bliss
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- estate planning
- pet trust
- wills
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- estate planning attorney near me
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Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “Can I create an estate plan on my own or do I need a lawyer?” Or “How is probate different in each state?” or “Does a living trust protect my assets from creditors? and even: “Can I be denied bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.