KEY TAKEAWAYS
- A will alone is not enough for families with a disabled child — a direct inheritance can immediately disqualify the child from SSI, Medi-Cal, and other government benefits they depend on.
- A special needs trust (also called a supplemental needs trust) pays for expenses not covered by government programs — from dental care and vision to Disneyland passes and travel — without touching benefit eligibility.
- The disabled child is never in control of the trust funds; the trustee pays vendors directly, which is what preserves the trust’s protected legal status.
- In California, a special needs trust and a limited conservatorship work hand-in-hand — the trust handles finances, while the conservatorship gives parents continued legal authority over medical and educational decisions after the child turns 18.
- No matter the size of the estate — $100,000 or $10 million — the structure works the same way. Wealth does not disqualify a family from using a special needs trust.
For families raising a child with a disability, the love and care they provide every single day is extraordinary. But one question tends to keep those parents up at night: What happens to my child when I’m no longer here?
In this episode of Legacy Protected, estate planning and special needs trust attorney Romelia “DeDe” Soto of The Soto Law Group walks through everything families need to know about special needs planning — from the most common and costly mistakes, to how the trust actually works in practice, to what California law requires. DeDe and her team serve families throughout Newport Beach, Huntington Beach, Irvine, and greater Orange County, with a practice that covers estate planning, trust administration, probate, conservatorship, and special needs trusts.
If you have a child with a disability and you haven’t set up a special needs trust yet, this article is for you.
What Most Families Have in Place — and What They’re Missing
DeDe Soto: When families come to us, a lot of times the child has just been diagnosed — whether it’s autism or another disability — and they haven’t done any planning at all. So we have to start with their revocable trust, and then of course they really should have a special needs trust as well, which they don’t have in place.
With older clients, they often know they need a limited conservatorship once their child turns 18 so they can continue going to medical appointments and advocating on their behalf. But even then, many still don’t have a special needs trust.
A lot of people just don’t think about it. They assume, “I’m going to take care of my child — why do I need anything formal?”
Why a Will Alone Is Dangerous for Your Child’s Future
DeDe Soto: This is extremely important for families to understand. A will that leaves assets directly to a disabled child can be actively harmful. If that child is receiving any type of government benefit — SSI, Medi-Cal, regional center services — a direct inheritance will disqualify them from those benefits immediately.
It doesn’t matter whether the inheritance is $100,000 or $1 million. The child would be required to spend down that money first before any government benefits would resume. And those benefits aren’t just financial. They may include educational services through California’s regional center system, therapy programs, housing support, and more.
The money the parent worked hard to leave behind — money meant to supplement their child’s care — ends up replacing government support instead. That is the exact opposite of what the parent intended.
What a Special Needs Trust Actually Does
DeDe Soto: In practical terms, a special needs trust — sometimes called a supplemental needs trust — is a legally separate trust created specifically for a disabled child. It has its own tax identification number and files its own tax returns. Its entire purpose is to pay for things that government benefits do not cover.
For example: if a child loves Disneyland, the special needs trust can pay for annual passes. If dental care or vision isn’t covered by Medi-Cal — and in California, it often isn’t — the trust pays for that. If the child needs a specialized bed, the trust buys it. If they travel to visit family in another state, the trust covers that trip. If they want to give birthday gifts to family members, the trust can do that too.
As the child gets older, if they’re able to live in a home with care providers, the special needs trust can actually own that home and cover all related expenses — property taxes, insurance, upkeep — without affecting a single dollar of government benefits.
The trust is broad and expansive by design. It’s all for the benefit and quality of life of the disabled person.
“Special Needs Trust” vs. “Supplemental Needs Trust” — Is There a Difference?
DeDe Soto: These terms can be used interchangeably. You can call it a special needs trust or a supplemental needs trust — they refer to the same structure. However, I prefer the term “special needs trust” because it’s more clearly distinguishable when the child is applying for government benefits. The terminology leaves no room for confusion. A supplemental needs trust can sometimes refer to a different type of provision inside a revocable trust, so using “special needs trust” keeps everything unambiguous.
First-Party vs. Third-Party: Which Type Does Your Family Need?
DeDe Soto: There are two types of special needs trusts in California, and understanding the difference matters.
A third-party special needs trust is funded with someone else’s money — the parent’s assets, a grandparent’s life insurance, an aunt or uncle’s inheritance. This is what most families need. There is no payback provision. When the disabled person eventually passes, whatever remains in the trust goes to the beneficiaries named in the document — typically siblings or charities. Other family members can contribute to it at any point, which makes it a powerful tool for the whole extended family.
A first-party special needs trust is funded with the disabled person’s own money — most commonly from a personal injury settlement or legal judgment. This type includes a Medi-Cal payback provision, meaning the state must be reimbursed for benefits received once the beneficiary passes.
Many families don’t know the difference, and that’s one of the core risks of trying to handle special needs planning without professional guidance.
How the Trust Protects Government Benefits
DeDe Soto: Think of the special needs trust as a bank account with a protective coating wrapped around it. The disabled person is the beneficiary — but they are never the trustee, and they never have direct control over the funds. If they did, the trust would lose its protected status entirely.
The trustee manages the money and pays vendors directly. So if there’s a dental appointment, the trustee pays the dentist. If the child needs tickets to Knott’s Berry Farm, the trustee purchases those tickets. The cash never passes through the beneficiary’s hands.
Because the funds legally belong to the trust — not the disabled person — they don’t count against benefit eligibility. The trust can hold tens of millions of dollars, and the beneficiary will still qualify for Medi-Cal and SSI.
And importantly, the grantor of the trust — the parent or grandparent who created it — determines what happens to the remaining assets when the beneficiary passes. They stay in control of those decisions.
The Real Cost of Skipping This — or Doing It Yourself
DeDe Soto: If parents skip special needs planning entirely, their child could lose every government benefit they’re currently receiving. That’s not a hypothetical — it happens.
And if a family tries to set up a trust on their own using an online template, there are required legal provisions — what I call the “secret sauce” — that make the trust valid for government benefit purposes. If those provisions are missing, the child can be disqualified from benefits even while the parents are still alive.
We’ve also seen situations where a well-meaning grandparent leaves money directly to a disabled grandchild in their own will — maybe $25,000 or $30,000 — thinking they’re being generous. What actually happens is that gift gets deducted from the child’s existing benefits, dollar for dollar. They have to use that money before their benefits resume. We’ve had to petition the court to remedy situations like this, and it was a long, costly process.
Once a special needs trust is in place, the family should inform all relatives: do not leave anything directly to this child. Name the special needs trust as the beneficiary — on wills, trusts, and life insurance policies alike.
What Happens When You Leave It to a Sibling Informally
DeDe Soto: A lot of parents assume a sibling will simply step in and take care of their disabled brother or sister. And while a sibling can absolutely be involved in caregiving, without legal structure in place, they have no authority to act.
They cannot attend medical appointments. They cannot make healthcare decisions. They cannot make educational decisions. They have zero legal authority — full stop.
And here in California, parents need to understand something important: when a child turns 18, the parent also loses that automatic authority. Even if the child has been disabled since birth, a parent cannot simply attend doctor’s appointments or make medical decisions anymore without legal documentation in place.
That’s why within the special needs trust, you can actually designate two separate roles: one person as the financial trustee — someone who is good with money and managing the finances — and another person as the care coordinator, a family member who oversees day-to-day wellbeing. The trust can even compensate that caregiver for their time and service.
The Special Needs Trust and Limited Conservatorship: A California Pairing
DeDe Soto: In California, a special needs trust and a limited conservatorship really go hand-in-hand. Once the child turns 18, the trust handles the financial side, while the limited conservatorship gives the parent continued legal authority over five specific areas:
- The conservatee’s place of dwelling
- Access to confidential records and papers
- The right to limit the conservatee’s ability to contract, if they lack capacity
- The right to give or withdraw medical consent
- Authority over educational decisions
I always advise families to begin the limited conservatorship process a few months before the child’s 18th birthday to avoid any gap in legal authority. In Orange County, this is something we handle regularly alongside the special needs trust — they are two parts of the same plan.
What Happens to the Trust When the Parent Passes
DeDe Soto: The trust does not end when the parent passes — it continues for the lifetime of the disabled person, and someone must be prepared to manage it. That means filing annual tax returns, managing investments, paying property taxes and insurance if the trust owns real estate, and continuing to make payments to vendors on the beneficiary’s behalf.
Just like a revocable trust, the special needs trust names successor trustees and can include trust protectors to provide oversight. The structure is similar — but the trust contains additional, specialized language that makes it legally distinct and ensures benefit eligibility is preserved throughout the beneficiary’s lifetime.
When the disabled person eventually passes, remaining assets are distributed according to what the trust document specifies — most commonly to siblings or named charities.
California-Specific Planning and Local Resources
DeDe Soto: Here in California, families in Orange County, Newport Beach, Huntington Beach, and Irvine have access to a remarkable network of support — but accessing those resources depends on having the right legal structure in place.
California’s regional center system is one of the most robust in the country. Whether you’re in Orange County, Los Angeles, or Riverside, the regional center provides services, programming, and advocacy for disabled individuals. Many of these services require the child to maintain benefit eligibility — which is exactly why the special needs trust matters so much.
There are also educational advocates who can petition school districts to ensure disabled children receive the accommodations and special education services they’re legally entitled to. And there are community groups — particularly for families navigating autism — that provide ongoing support.
Our firm works closely with regional centers and connects families to the advocates and resources that fit their situation.
What the Process Looks Like — From First Call to Signed Documents
DeDe Soto: When a family calls us, they usually know they need something, even if they’re not sure exactly what. After our first meeting, we design the revocable trust and the special needs trust together. We ask parents to think through key questions: What is the ideal living situation for their child — a group home, a private home, or living with a family member? What does their child enjoy? What helps them thrive?
We also ask parents to prepare what’s called a letter of intent — a personal document, separate from the legal trust, that captures the nuances of the child’s life. What activities do they love? What medications do they take? What are their allergies? Who are the important people in their life, and how do those relationships get maintained? If the parent wants to leave a larger share of the estate to the disabled child than to their other children, the letter of intent is where they explain that reasoning.
This document is not legally binding, but it is invaluable for any future trustee or caregiver who didn’t grow up knowing this child. I recommend updating it every one to three years as circumstances change.
From initial meeting to signed documents, the process typically takes approximately 30 to 45 days. After signing, we advise on funding — which assets should be transferred into the special needs trust and which accounts or policies should name it as a beneficiary.
The One Question Every Parent Should Ask
DeDe Soto: If you’re not sure whether your family needs a special needs trust, start here: Are you planning to leave any assets to your disabled child?
If the answer is yes — then ask yourself: What do you want that money to pay for? Do you want it used for basic food and shelter, or do you want it to supplement what the government already provides so your child can also enjoy dental care, travel, recreational activities, and a higher quality of life?
If you want it to supplement, a special needs trust is the answer. It can never be too early to plan — but it can be too late.
Ready to Protect Your Child’s Future? The Soto Law Group Is Here.
Whether you’re just beginning to think about special needs planning or you’ve been putting it off because it feels overwhelming, Romelia “DeDe” Soto and the team at The Soto Law Group are ready to guide your family through every step — with clarity, experience, and genuine compassion for what you and your child are navigating.
Serving families throughout Newport Beach, Huntington Beach, Irvine, and greater Orange County, The Soto Law Group brings real-world expertise to special needs trusts, revocable trusts, limited conservatorship, and the full scope of estate planning for families with a disabled loved one.
📞 Call us at (949) 945-0059
🗓️ Schedule your consultation online at thesotolawgroup.com/contact-us-newport-beach-lawyers
Don’t leave your child’s future to chance. Let’s build the plan that protects them — for life.