Special needs trust can help children with disabilities

A child with special needs or a disability may need help with protecting their financial future and assuring that their needs are met. Through effective estate planning, you can address their financial needs by establishing a special needs trust that protects their assets while they receive government financial assistance.

Financial needs

A child with a disability or special needs may be unable to achieve financial independence or their expenses may exceed what government assistance can cover. Funding a third-party special needs trust helps assure that a child may continue to qualify for benefits by minimizing the assets held in their name. It may also set aside an inheritance so that the child remains eligible for government benefits.

Families, while planning these trusts, should balance present needs with the child’s future requirements.  It is important to determine the allocation of funds among long-term care, medical needs, and housing.

Families need to decide whether the estate should be allocated equally. Estate taxes are another important consideration while structuring estates.

Planning for contingencies

High net worth families who directly pay for a family member’s expenses may also use a third-party SNT for access but not for monthly income. Certain programs or housing are available to anyone eligible for supplemental security income regardless of their family’s capacity to pay for their needs.

SNT planning should include financing these trusts to meet lifelong needs. A medical emergency or gap in supportive care may be especially disruptive and must be considered. Trust planning should also anticipate new government assistance programs.

Complexity

Families need to determine whether the trust should be established for the grantor’s, usually a parent’s, lifetime and whether grandparents or other family members will contribute to lifelong care.

Selecting assets that fund the care is another important decision. These should not disqualify a family member from benefits. Cash, stocks, bonds, and other liquid assets are often used for a SNT but may not always be available. Some family assets may be comprised mostly of nonliquid assets such as real estate or a business.

Selecting a trustee is another important decision. Their duties include tax reporting, record keeping and records management. Competency and family dynamics play a role in this decision.

A trust company, bank or other independent corporate trustee is another option. These can assure financial management and eliminate situations where a family member with a disability depends on decisions made by other family members.

Each family has their own unique needs. Attorneys can help establish these trusts and assist with other options such as guardianships, conservatorships, and individual education plans.