How can a special needs trust assist my child with special needs?

Over 50 million people across the United States have some form of disability, with nearly half being severely limited in their functioning.  Having a disabled child is extremely rewarding, but it is not without its challenges.  For the parents of disabled children, ensuring that their children receive the financial care they need is often one of their greatest concerns. Below, our International Estate Planning Attorneys at Dunlap Bennett & Ludwig explore the basics of special needs trusts.

What is a Special Needs Trust?

A special needs trust is a trust set up specifically for individuals with special needs. This trust can act as an additional supplement to any financial assistance the individual may already receive from government programs. A well set up trust should allow your disabled child or family member to continue to qualify for government benefits while receiving funds from the trust.  There are several different options when it comes to special needs trusts, including:

  • First-party trust: A first-party special needs trust will hold assets that belong to the disabled individual, such as an inheritance or accident settlement.
  • Thirdparty trust: A third-party special needs trust will hold funds belonging to a beneficiary that wishes to help the special needs individual.  Often, parents will place assets like cash or real estate into a third-party special needs trust to benefit their disabled child.
  • Pooled trust: Pooled special needs trusts are generally set up by a non-profit organization to benefit multiple disabled people.  Assets from the special needs individuals are combined and invested, with beneficiaries sharing in the distributions.

Why a Special Needs Trust?

With the rising cost of healthcare, government benefits can prove essential in covering the many medical costs incurred by disabled individuals.  To qualify for benefits, however, the disabled individual cannot have assets that exceed a specific amount set by the program, as well as by state and federal law.  Leaving your disabled child or relative significant funds could hinder their eligibility for government benefits.

A special needs trust often offers an excellent way to provide supplemental financial assistance to a disabled loved one, without compromising their ability to receive government benefits.  Contact an estate planning attorney for individualized assistance with the creation of your special needs trust.

 

Posted in: Estate Planning