If you have a child with special needs, your job as a parent is much different from that of most others. The average parent spends about two decades providing for a child and a few more offering love and guidance. They can pass on in peace, knowing their children have their own family, as well as adequate social and financial support.
For special needs parents, however, daily care may be necessary for the rest of their lives. It’s also important to think about what happens to your child after you die. One of the biggest concerns, other than allocating adequate financial resources for a special needs child, is ensuring a minor or adult child with disabilities has access to state support after an inheritance. A special needs trust may be the solution you need.
Special needs trusts disburse funds over time
Typically, trusts disburse an inheritance over an extended period of time or hold assets until certain criteria are met. In some cases, an heir could need to reach adulthood to gain access to trust assets.
For special needs trusts, planning considerations may be significantly different. The parent or grandparent of a special needs child can design the trust to only disburse a certain amount of assets per year or only for certain expenses. This structure offers a host of benefits for the beneficiary, as well as peace of mind and legacy control for the person creating the trust.
A well-designed trust offers tax protection and more
Staggering the disbursement of trust funds is a critical means of decreasing liability. If your special needs child has to have income below a certain threshold to live in a group home, for example, or receive other benefits he or she relies on, the trust can prevent an inheritance from causing a disqualification. Obviously, that offers tax benefits for the beneficiary as well. Instead of needing to pay taxes on a massive lump sum, only the amount disbursed in any given year will impact taxes.
Creating a special needs trust helps to ensure your child or grandchild will have assets to provide for basic needs well after you pass on. The control of funding and structuring the trust allows you to plan carefully for the future needs of your child and reduce the risk of financial abuse or other negative situations after you pass on.
Finally, so long as the design of the trust calls for administration by a third party individual, the assets in the trust remain there, even when the special needs beneficiary dies. The party who creates the trust can allocate those funds to someone else or even to a charitable cause. If you haven’t yet begun planning a special needs trust for your child, it may be time to start considering this option.