If there is anything more magical and moving than being a parent, it may be becoming a grandparent. Much like with your children, you want the best possible future for your grandchildren. What’s best can quickly become complicated if your grandchild has special needs.
Whether the condition is congenital or acquired through disease or trauma, it is likely that special needs will affect your grandchild’s life indefinitely. It can also impact the parents in unpredictable ways. The stress of caring for special needs children can traumatize some or bring out the worst in others.
Even if you are proud of how your child and their spouse have cared for your special needs grandchild, you may still have strong feelings about leaving behind a legacy to protect that special someone. Creating a special needs trust is the simplest and best way to provide for a special needs grandchild in the future.
A trust allows you to allocate resources to someone incapable of managing them
If there are concerns that your grandchild will not ever achieve independence or if they have profound medical expenses, a trust is a wise decision for an inheritance. For those who do not have the capacity to manage finances, the protection of a trustee helps ensure that there will be resources for them for as long as the trust lasts.
In situations with extreme medical debt, a trust protects your grandchild from the loss of that inheritance to creditors. It can also help ensure that your grandchild continues to still receive necessary benefits, such as Medicaid. A lump sum inheritance could disqualify your grandchild from those kinds of benefits for many years.
A carefully structured trust, however, could provide them with ongoing financial resources, provided that you properly fund the trust and name the right person as trustee.
Take care with your choice of trustee
When creating a special needs trust, one of the most important considerations, other than disbursement limitations and income caps, is whom you name as trustee. Grandparents leaving assets for a special needs grandchild often name their child as trustee. While this is a good idea, it may also be wise to name a second party as trustee to minimize the risk of mistakes or fraud.
No matter how much you trust someone, it can be very difficult to predict how they will act when the issue pertains to money, especially a large sum. By naming two or more trustees, you help ensure that the assets in question will only get used in the manner that you have approved. This ensures that they will be available for your special needs grandchild for many years to come.
If you want to provide comfort or support for a special needs grandchild, it may be time to consider creating a trust specifically for that purpose.