Parents of adults with disabilities go to great lengths to ensure their child has a stable future. This often requires shrewd financial planning. Loving parents need to account for all the possible needs of that child – not just in the present, but long into the future as well, even after they themselves are gone.
One potential option is a special needs trust. So what is it, and why might it be a good choice for your family?
The basics of a special needs trust
A trust, at its core, is a legal relationship between:
- The person funding the trust
- The person getting the benefits from the trust
- The person in charge of administering the trust
A special needs trust is simply a type of trust created specifically to care for someone with disabilities. Oftentimes this is parents, who want to ensure their child – maybe now an adult with a long future ahead of them – receives proper financial support even after they pass away. The trust could be for a child born with a disability, or for someone who became disabled at some point during their life.
The trust can be first- or third-party, depending on whose assets fund the trust. Parents can set up a trust while they’re still alive, or as part of their estate plan have a special needs trust form upon their own death.
Eligibility for government programs
Many adults with disabilities rely on government programs such as Supplemental Security Income or Medicaid. Those types of programs often come with strict income limits. If a parent leaves a large sum of cash or other assets to their child, it may mean the child is abruptly ineligible for some programs – and as a result, loses those vital sources of support.
A special needs trust can avoid this problem altogether. Funds in a special needs trust generally do not count against monetary eligibility requirements. So by using a trust, parents can offer their child as much help as possible while helping ensure they stay eligible for those government programs.
When done correctly, a special needs trust can be a key piece of an estate plan. They are quite complex to set up, however, and managing the trust can be tricky. There are also some limits on what a special needs trust can and can not be used for. Because of this, it’s often a good idea to speak with an attorney about your hopes and goals. When it comes to caring for your child long into the future, it’s important to make sure you leave no stone unturned.