What is a Special Needs Trust?
A trust is a legal entity that holds assets for someone’s benefit. The creator of the trust puts property into the trust and names a trustee to manage the property and distribute it to the beneficiary according to the provisions in the trust. A Special Needs Trust places limitations on the types of distributions that the trustee can make, so that trust distributions will not disqualify the beneficiary from eligibility for government programs.
The Two Types of Special Needs Trusts
Self Settled Special Needs Trust
A Self Settled Special Needs Trust is funded with assets that belong to the disabled beneficiary. For example, if a child becomes disabled as the result of an automobile accident, and receives a substantial settlement from litigation, the settlement funds belong to the child. The parents can create a Self Settled Special Needs Trust to receive the settlement funds.
Third Party Special Needs Trust
A Third Party Special Needs Trust is established by a third party with assets of the third party. An example would be the parent of a Down Syndrome child creating a Special Needs Trust for the child as part of the parent’s estate plan.
Who Needs a Special Needs Trust?
If you are a parent of a child who is receiving benefits from a needs based government program (or who might be eligible for such benefits in the future) you need to understand the options for leaving assets to your child:
- Disinherit the child, leaving the child with no financial means beyond government benefits
- Leave assets to the child, causing disqualification from government benefits until the assets are spent down
- Leave assets to a sibling of the child or another family member to use for the child, trusting that person will not use the funds for himself, or lose them through personal circumstances such as a divorce or a lawsuit
- Leave assets to a Special Needs Trust where your child will be protected
The best option to provide financially for a child with special needs, without jeopardizing the child's qualification for government benefits, is a Special Needs Trust.
It’s important that you have expert help in designing a Special Needs Trust to meet your child’s needs. We have experience in helping countless families make sure that their child with special needs will be cared for should anything happen to them. Contact us today to take the first step in making sure your child will have the assets they need to secure his or her future.