As the parent of a special needs child, you know how hard it can be to get through the day. Every task requires more attention. There’s never a break. You love your child, and you’re always ready to meet the next challenge. But how would your child fare if you weren’t around?
It’s likely you’ve thought about this. As much as you’ve encouraged your child toward growth and success, you may have realized he or she would need ongoing support. Whether that means access to special programs or constant personal attention, that support costs money. And that’s where a special needs trust may come into play.
What is a special needs trust?
A special needs trust is a financial tool that can help your child retain access to valuable government programs such as Supplemental Security Income (SSI) and Medicaid. These programs often impose strict limits on the incomes and assets their beneficiaries can have. For example, a disabled person with access to more than $2,000 in cash and personal property may no longer qualify for SSI.
The funds you place into your child’s special needs trust won’t disqualify him or her for these programs. But they can still be used to improve your child’s quality of life.
Things a special needs trust can pay for
The important thing to note here is that the special needs trust is meant to supplement your child’s government benefits, not replace them. Accordingly, the trust generally shouldn’t provide your child with cash or pay for services your child may receive through government programs. They’re more often used to pay for services, objects and comforts such as:
- Personal care attendants
- Wheelchairs and specialized equipment
- Guardianship and legal expenses
- Job training
- Computers
- Home furnishings
- Bus or rail passes
- Recreation
You’ll need to appoint a trustee to manage these funds, and that trustee will need to honor the terms of the trust. The language of the trust matters.
Funding a special needs trust
There are several types of special needs trusts, and they’re distinguished by the ways they’re funded:
- A first-party trust is funded by the beneficiary’s personal assets, such as if your child inherited wealth from a relative.
- A pooled trust combines the assets from multiple families and is managed by a nonprofit organization. The trust will direct a share of the funds toward your child based on the amount you invested.
- Third-party trusts are the most common type of special needs trust. They’re often created by parents, grandparents or other relatives who will a portion of their assets toward the trust.
How much you and your child put into the trust depends on your situation. You want to review your child’s eligibility requirements for key programs, your goals and the associated costs. So long as the trust has funds, it can support your child throughout his or her lifetime.
Secure your child’s future
When your child needs your help with daily tasks, you may feel as though every day is a new version of the same story. But time is always marching on. The day will come that your child becomes an adult. And the day will come that you won’t be around.
The good news is that you can plan for these occasions. A special needs trust is one way you can arrange for your child’s ongoing security and comfort.