When you have a child with special needs, ensuring their future care and financial security is a top priority. One way to achieve this is by setting up a special needs trust (SNT), which allows you to provide for your child without jeopardizing their eligibility for government benefits, such as Medicaid and Supplemental Security Income (SSI).
What Is a Special Needs Trust?
A special needs trust is a legal document that holds assets for a beneficiary with special needs. The purpose of this trust is to supplement, not replace, the benefits your child receives from government programs. With an SNT in place, you can ensure that your child has access to additional resources to improve their quality of life, while preserving their eligibility for vital services, as Special Needs Alliance reports.
Who Should Be Involved in a Special Needs Trust?
Setting up a special needs trust involves three key parties:
- Donor: The person who establishes and funds the trust, typically the parent or guardian.
- Trustee: The individual or entity responsible for managing the trust and using the funds appropriately.
- Beneficiary: The person with special needs who benefits from the trust.
You may also name a remainder beneficiary, who will receive any leftover assets if your child passes away.
Why Is It Necessary to Set Up a Special Needs Trust?
You might wonder if leaving money directly to your child or a trusted family member is enough. Unfortunately, doing so could disqualify your child from receiving essential benefits. A special needs trust helps you avoid this risk by allowing you to direct your estate to your child without affecting their eligibility for government programs.
The trust can cover a variety of expenses that improve your child’s quality of life, such as:
- Personal care attendants
- Special therapies or treatments
- Adaptive equipment
- Education and recreational activities
What Types of Special Needs Trusts are There?
There are three main types of special needs trusts:
- Third-Party Special Needs Trust: Parents or other relatives establish a third-party special needs trust to benefit a child with special needs. These trusts do not require Medicaid payback provisions.
- First-Party Special Needs Trust: The beneficiary can establish a first-party SNT using funds from an inheritance, legal settlement, or other source. Medicaid may receive the remaining assets upon the beneficiary’s death.
- Pooled Trusts: Nonprofits manage pooled trusts that combine assets from multiple sources, such as third and first-party funding. A pooled trust is a good fallback option when the two previous options aren’t available.
How Should You Fund a Special Needs Trust?
A trust needs adequate funding to serve its intended purpose. Most parents fund the SNT upon death through life insurance, retirement accounts, or savings. However, you can contribute to the trust during your lifetime if you have sufficient resources. Knowing that the trust is funded and ready to support your child’s future needs, this strategy can offer peace of mind.
What are the Responsibilities of a Trustee?
The trustee plays a crucial role in managing the special needs trust. Their responsibilities include:
- Managing trust assets
- Making payments on behalf of your child (but not directly to the child)
- Keeping detailed financial records
- Ensuring that the trust does not affect your child’s government benefits
Some families choose a trusted family member, while others opt for a professional or corporate trustee. Either path can be successful. However, you must carefully weigh your options. The right trustee must understand the requirements of a special needs trust and prioritize the child’s long-term well-being.
Can a Special Needs Planning Attorney Help?
Creating a special needs trust involves complex decisions that require careful consideration. A special needs planning attorney can guide you through setting up the trust, planning to fund it adequately and helping you select a trustee. They will also ensure that the trust complies with current legal standards, critical for preserving your child’s government benefits.
Start Building a Secure Future for Your Child with a Special Needs Trust Today
Securing your child’s future starts with creating a plan tailored to their needs. Contact our office today to schedule a consultation with a special needs planning attorney. We’ll help you navigate the process and ensure that your child has the resources for a fulfilling life.
Key Takeaways
- Protect Government Benefits: A special needs trust allows your child to receive an inheritance without losing eligibility for vital programs, like Medicaid or SSI.
- Enhance Quality of Life: The trust provides supplemental needs like therapies, personal care and recreation, improving your child’s daily experience.
- Ensure Long-Term Financial Security: Proper funding ensures that resources will be available throughout your child’s life.
- Maintain Control Over Assets: Decide how to manage and distribute assets to protect your child’s future financial stability.
- Appoint a Reliable Trustee: Select someone who will manage the trust responsibly and in your child’s best interest.
Reference: Special Needs Alliance “A Special Needs Trust and Your Plan for the Future“