Special Needs Trusts – Planning for Children with Special Needs

We frequently work with families with special needs children to set up special needs trusts.  A special needs trust is simply a way to leave assets to take care of a special needs child without jeopardizing their entitlement to government benefits.  For a special needs individual, government benefits are often vital.  Medicaid is typically the only type of health insurance that a special needs child can get.  The problem in planning for a special needs child is that if you leave an inheritance directly to a special needs benefits recipient, they will lose their benefits.  They will be faced with spending down those assets until they can requalify for Medicaid and oftentimes the assets run out months or years before they can requalify for Medicaid.

Generally, there are three potential estate planning options for families with special needs children.  The first option is to disinherit the special needs child.  This would mean that there would be no interference with their government benefits because there would be no inheritance from Mom and Dad.  Unfortunately, this also sends a message that the special needs child is not as important as other family members.  This seems like a very poor solution to the problem.

The second option for special needs planning is to leave the assets to siblings with an understanding that the siblings will take care of their special needs brother or sister.  This assumes that the sibling doesn’t lose the money in a divorce or to a creditor and that they have the desire and energy to take care of their special needs sibling for the rest of his or her life.  This doesn’t seem like a very good solution to the problem either.  It places an unfair burden on the siblings and assumes a “perfect” outcome where the non special needs sibling never faces a financial crisis.

The third and best option for special needs planning is to create a special needs trust.  By creating a third party stand alone special needs trust, you can leave assets to a special needs child that are not countable assets for Medicaid or SSI purposes.  The assets can be used to fill gaps that are left in the government benefits programs and make sure that your special needs son or daughter has a safety net to take care of them.  Even when government benefits are not an issue, a properly drafted trust with care manager provisions and a professional trustee can make sure that your special needs child is not taken advantage of or abused.  If you would like more information about setting up a special needs trust for your special needs child, please contact us at Smith Barid, LLC to set up an appointment or a free telephone consultation.


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The Comprehensive Legacy Checklist

Ensure your estate is fully prepared for any eventuality with The Comprehensive Legacy Checklist. This essential tool is designed to help you and your family face the future with confidence, covering all critical areas from asset protection to healthcare decisions. Whether you’re setting up a plan for the first time or updating an existing one, this checklist highlights potential vulnerabilities and ensures nothing is overlooked.