Protecting Your Child with a Special Needs Trust

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By Angela Hayden

Apr 15

When you have a family member with special needs, it is important to understand that your estate planning strategy is unique and requires the assistance of an attorney experienced in creating Special Needs Trusts. If an inheritance is left directly to your family member with special needs, or in a “regular” trust, it could result in the loss of essential government benefits that assist with the cost of his or her care, thereby depleting the assets much faster than you might have expected.

A Special Needs Trust permits an individual that is 65 years or younger to receive certain resources beyond what is supplied by Medicaid without making him or her ineligible to receive government benefits.

A Special Needs Trust can be created while you are living or, you can create a will or a revocable living trust that establishes a Special Needs Trust at your death and transfers funds into the trust when you die.

Either way, a Special Needs Trust can provide a disabled dependent with the ability to pay for care and services that are not covered by government benefits. This includes things such as therapies, special equipment, education, travel costs associated with medical appointments, and other similar costs that are not covered by Medicaid.

When the government determines whether or not your loved one qualifies for benefits, the assets held in a Special Needs Trust are not considered because the funds held in the trust are not readily available to the beneficiary. The distributions from a Special Needs Trust are made on a discretionary basis based upon guidelines you set up when you establish the trust.

A Special Needs Trust could also be used to create financial incentives to ensure your loved one continues to be cared for the way you want, after you are gone. For example, we’ve built provisions into Special Needs Trusts that provide for payments to a guardian who takes the family member with special needs out of the house to movies and meals, for example, in the same way the parents did while they were living.

Finally, it is also important to consider how to ensure that the trust has sufficient funds throughout the life of the individual with special needs. One method that is commonly used is to name the Special Needs Trust as the beneficiary of the parent’s (or other relatives) life insurance policies. You will also want to ensure that the trust assets are wisely invested so the funds continue to accumulate and grow. Family members and friends should also be encouraged to make donations or gifts to the trust and/or to include it as a beneficiary in their will or life insurance policy.

It can be confusing to properly plan for a loved one with special needs, but when you work with the right legal team, you can create a plan that captures and provides more than just money. You can ensure that you provide the best quality of life, enrichment, and care for your loved one when you can’t be there.

If you would like to learn more about how to create or revise your own plan for your family, schedule a Family Wealth Planning Session with us. Call or book right online. This session is normally $750, but if you mention this article, you can find out how to get this session for free. We look forward to speaking with you!


About the Author

Angela discovered the joys of taking deep breaths, stopping to listen for the sake of listening (instead of for the sake of waiting for a chance to respond), assuming the best of intent behind people’s actions, and general mindfulness after experiencing a major life change in recent years and brings a bit of that to every client interaction. She has found her life (personal and professional) and tennis game have improved dramatically as a result. Namaste!