California Probate Code Section 3604 - Creating Special Needs Trust

Law Relating to Creation of the Special Needs Trust Probate Code section 3604 "permits personal injury damages or settlement proceeds for a disabled minor or incompetent person to be delivered to a trustee of a special needs trust." (Cal. Law Revision Com. com., 52B West's Ann. Prob. Code (2009 ed.) foll. 3604, p. 151.) Such a special needs trust "'is intended to allow the beneficiary to continue to maintain eligibility for certain needs-based government benefits, such as S.S.I. or Medi-Cal.'" (Shewry v. Arnold (2004) 125 Cal.App.4th 186, 194.) The statute reads, in relevant part, as follows: "(a)(1) If a court makes an order under Section 3602 or 3611 that money of a minor or person with a disability be paid to a special needs trust, the terms of the trust shall be reviewed and approved by the court and shall satisfy the requirements of this section. The trust is subject to continuing jurisdiction of the court, and is subject to court supervision to the extent determined by the court. . . .. . .(b) A special needs trust may be established and continued under this section only if the court determines all of the following: (1) That the minor or person with a disability has a disability that substantially impairs the individual's ability to provide for the individual's own care or custody and constitutes a substantial handicap.(2) That the minor or person with a disability is likely to have special needs that will not be met without the trust.(3) That money to be paid to the trust does not exceed the amount that appears reasonably necessary to meet the special needs of the minor or person with a disability." (Prob. Code, 3604, subds. (a), (b).) The order approving the compromise of Audrey's medical malpractice claim and establishing Audrey's special needs trust includes findings by the probate court satisfying each of the elements of Probate Code section 3604, subdivision (b). The special needs trust established for Audrey by the probate court's order meets the requirements of federal law, which permits an individual to be eligible for Medicaid assistance despite the existence of "a trust containing the assets of an individual under age 65 who is disabled . . . and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title . . . ." (42 U.S.C. 1396p(d)(4)(A).)