Every estate plan should be tailored to the unique needs of the individual. There are many estate planning tools that can be used, but some tools may be more appropriate for one situation or goal over another.
If you have a child with special needs, one of your estate planning goals may be to help financially support that child after you pass away. One way to accomplish this goal is by creating a third-party special needs trust.
What is the purpose of a special needs trust?
The main purpose of a special needs trust is to supplement the government benefits that your child receives, without disqualifying your child from those benefits. This is an important consideration for many families because a child or adult’s eligibility for governmental benefits, such as Supplemental Security Income, Medicaid or others, is often based on that person’s ability to pay for his or her own expenses.
How does it protect my child’s government benefits?
If your child qualifies for governmental benefits and directly receives a large inheritance, that lump sum could disqualify him or her from continuing to receive those benefits. This mistake often happens when a parent names a child with special needs as a beneficiary in a will.
However, a special needs trust prevents this from happening by designating a trusted person or entity as a trustee. The trustee can use the money in the trust to purchase items or services for your child. Because your child will not control the money in the trust, the inheritance is not considered when governmental agencies determine eligibility for various benefits.
If a many of your child’s basic expenses are covered with the help of governmental assistance, the money you leave your child in a special needs trust can go toward creating a more comfortable and independent life for your child. This can include helping your child afford to continue living in the family home or afford fun opportunities like a trip to the movie theater.
Estate planning can be complicated when your goal is providing for a child with special needs. However, a third-party special needs trust can be an appropriate estate planning tool to reach your desired outcome.