If you are the parent of a special needs child, you probably often worry about what will happen when you are gone. Who will care for your child and will they have enough money to enjoy life? A special needs trust can help you put your worries to rest.
If your child uses Medicaid, they must meet the financial limitations to remain qualified for benefits. Some parents mistakenly think that they should disinherit their child or leave his/her inheritance to a sibling. However, there are problems with both of these options.
For instance, if you disinherit your child, this leaves them with only the bare necessities of food, housing and clothing provided through government benefits. Making a sibling her guardian puts an undue burden on your other children, who may be unable to fulfil those obligations if they face a financial crisis such as a divorce. As a result, your child with special needs could have a lesser quality of life.
How a Special Needs Trust Can Protect Quality of Life
However, there is another way. Putting assets into a Special Needs or Supplemental Needs Trust allows your child to have preserve assets to improve quality of life without disqualifying him from Supplemental Security Income (SSI) or Medicaid.
Funds from the trust cannot be distributed directly to the disabled beneficiary. Instead, they must be disbursed to third parties who provide goods and services to the disabled beneficiary.
Special Needs Trusts are flexible and customized to provide additional funding for the type of care that you want for your child. An attorney who specializes in special needs planning can help you set up a Special Needs Trust to supplement your loved one’s public benefits.
A Special Needs Trust can be used for a wider variety of life-enhancing expenditures:
- Annual check-ups at an independent medical facility
- Attendance at religious services
- Supplemental education and tutoring
- Out-of-pocket medical and dental expenses (not covered by other benefits)
- Transportation (including purchase of a vehicle)
- Maintenance of vehicles
- Purchase materials for a hobby or recreation activity
- Funds for trips or vacations
- Funds for entertainment such as movies, shows or ball games
- Purchase of goods and services that add pleasure and quality to life: computers, videos, furniture, or electronics
- Athletic training or competitions
- Special dietary needs (above and beyond what other benefits provide for)
- Personal care attendant or escort
Special Needs Trusts are a critical component of your estate planning if you have disabled beneficiaries for whom you wish to provide after your passing. An estate planning attorney can help you create the trust that best fits your family’s needs.
Types of Special Needs Trusts
You may need a pooled special needs trust. A pooled special needs trust “pools” the assets of a group of beneficiaries together. A non-profit organization typically manages these assets for the benefit of the beneficiaries. Your loved one has funds used only for him/her in a sub-account. This setup works well if there are no qualified people willing to act as a trustee or the level of assets is not large enough to justify the complexity of establishing a stand-alone trust.
Alternately, you can establish a stand-alone trust funded with a separate asset like a life insurance policy. Other family members or friends may contribute to the trust as well.
If your child has special needs, don’t delay planning for his/her future. Procrastinating has major consequences that are hard to recover from, but making a plan now can give you peace of mind.