Creating a Special Needs Trust to Care for Your Child Later in Life
If you have a child with a disability, you probably wonder how they will be taken care of when you are gone. They may be unable to manage their own finances or work. You and they may heavily rely on government assistance to pay their bills. You need to plan for how this will continue after you pass away. Many parents rely on a special needs trust to protect and generate income for their child in the future. If you need to plan your estate with your child’s needs in mind, contact an experienced attorney today for help with your case.
What is a Special Needs Trust?
A special needs trust is a trust fund that is usually privately set up by a family for the benefit of a person with disabilities. It is administered by a trustee, which may be another family member, an attorney, or someone else. A special needs trust can be set up to be the general source of income for the beneficiary. However, it is more common for the trust be set up as supplemental care for what is necessary after government assistance. Ultimately, how the trust’s principal and income can be spent by the trustee depends on how its provisions are drafted.
Reasons for a Trust
You may wonder why you cannot simply leave your child money that another relative or caretaker can use, or possibly leave the relative or caretaker money or assets to be used for your child. There are actually a number of reasons why these strategies are likely to fail your child in the future. Leaving your child a great deal of money or assets can change their income level, which can negatively impact government assistance eligibility, including for Supplemental Security Income and Medicaid. Since your child may not be capable of handling their finances, this is less than ideal. The second option, leaving money and assets to the next caretaker, is dangerous because there are no legal boundaries or restrictions on the use of the money. Additionally, if that individual were to pass away, nothing says the money or assets intended for your child will be transferred to the next responsible adult.
Placing your assets into a trust for the purpose of the trust’s income or principal to be used for your child’s care is the best way to avoid these problematic future scenarios.
Choose Your Trustee Wisely
No matter how the trust is drafted, the trustee will have a great deal of power to ensure your child is properly cared for. You need to trust this individually and be sure that they understand how the trust’s income to affect your child’s government assistance eligibility. For example, if the trustee sent money to the beneficiary directly, this could increase your child’s income and cause them to lose out on benefits. To avoid this, the trustee should pay service providers directly.
This is why it is often beneficial to hire a professional trustee for a special needs trust than to rely on a family member who may be burdened by the complexities and responsibilities of managing the trust for years to come.
Contact an Estate Planning Attorney Today