Establishing a trust can be a powerful tool for securing a future for a loved one with special needs, and a frequent question arises regarding its capacity to fund entrepreneurial ventures like supported employment opportunities. A properly structured Special Needs Trust, particularly a third-party Special Needs Trust, *can* indeed be utilized to provide startup capital for a supported employment business, but it requires careful planning and adherence to specific guidelines to avoid jeopardizing crucial public benefits like Supplemental Security Income (SSI) and Medi-Cal. The key lies in ensuring the funds are used for business expenses directly related to the supported employment venture, and not for the individual’s personal use, as that could disqualify them from needs-based government assistance. Approximately 65% of working-age adults with disabilities are unemployed, highlighting the critical need for innovative employment solutions and financial support.
What are the limitations on using trust funds for a business?
While a trust *can* fund a business, there are definite limitations. The SSI program, for instance, has strict income and resource limits. If the trust directly owns the business and generates substantial income, that income could be imputed to the beneficiary, potentially exceeding the SSI income threshold (currently $874 per month in 2024). Furthermore, the assets within the trust are subject to scrutiny. The Social Security Administration (SSA) generally allows a small amount of unearned income ($20 per month) without affecting benefits, and excludes the first $2,000 in assets. Anything exceeding these thresholds could impact eligibility. It’s crucial to structure the business arrangement so that the beneficiary isn’t considered an “owner” in the eyes of the SSA; rather, the trust holds ownership, and the beneficiary receives reasonable compensation for services rendered.
How can a trust be structured to support a business without impacting benefits?
A well-crafted trust agreement should explicitly outline the permissible uses of funds, including provisions for supported employment. The trust can establish a separate “business account” to track income and expenses specifically related to the venture. Crucially, the beneficiary’s compensation must be fair market value for the services provided. An independent assessment of the business plan and projected income is highly recommended. “We often advise clients to engage a vocational expert to assess the beneficiary’s skills, interests, and potential for success in a particular business,” Steve Bliss often says. “This ensures the venture is realistic and sustainable.” Funds can be allocated for legitimate business expenses like equipment, inventory, marketing, and insurance. It’s also important to consult with a qualified attorney and financial advisor specializing in Special Needs Trusts to ensure compliance with all applicable regulations.
What happened when a family didn’t plan properly?
I remember a situation with the Miller family. They had a son, David, with Down syndrome, who had a passion for woodworking. They used inheritance funds to buy him tools and materials, hoping he could sell his creations at local craft fairs. However, they didn’t establish a proper Special Needs Trust or consult with an attorney. When David started earning income from his sales, it quickly exceeded the SSI income limit, and his benefits were suspended. They were devastated, and their good intentions actually harmed David’s financial security. It took months of legal maneuvering and significant financial losses to restore his benefits. It was a painful lesson about the importance of proactive planning.
How did things turn out when a family followed best practices?
Fortunately, the Johnson family learned from the Miller’s experience. Their daughter, Sarah, had a talent for graphic design. Before launching her freelance business, they worked with Steve Bliss to establish a third-party Special Needs Trust. The trust funded the purchase of Sarah’s computer and software, and stipulated that all income generated from her business would be deposited into a separate trust account. A vocational assessment confirmed her hourly rate was fair market value for her services. As a result, Sarah was able to build a successful business while maintaining her SSI and Medi-Cal benefits. She even started mentoring other young adults with disabilities, inspiring them to pursue their entrepreneurial dreams. “It was incredibly rewarding to see Sarah thrive, knowing that her financial security was protected by the trust,” Steve Bliss said. It proved that with careful planning, it’s possible to empower individuals with disabilities to achieve their full potential.
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About Steve Bliss at Escondido Probate Law:
Escondido 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 Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
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
living trust
revocable living trust
family trust
wills
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “How do trusts help avoid family disputes?” Or “Are retirement accounts subject to probate?” or “What is a pour-over will and how does it work with a trust? and even: “Can bankruptcy eliminate credit card debt?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.