As a parent of a special needs child, you worry. For their entire lives, you have taken care of him or her physically, emotionally and financially. But what will happen if your child outlives you? When you are no longer there, who will step in to fulfill those needs you provided? And how will they be able to do that?
One answer is a special needs trust, which is an essential part of an estate plan. This trust provides the money that will allow your child to maintain a lifestyle as close as possible with the one he or she had while you were still alive, caring and loving them. Additionally, such a trust provides funds without disqualifying your child from government benefits such as Supplemental Security Income and Medicaid.
Complex, detailed and worthwhile
When creating a special needs trust, you need more than a family meeting with key members willing to fund the trust. You also need outside assistance, so it is critical to contact professionals such as an experienced estate planning attorney and financial adviser.
They will educate you on special needs trust basics. For example, a trustee will oversee the funds, doling out money to your disabled child when he or she needs it. Also, special needs funds can be costly, requiring a minimum of $100,000, but some may need millions of dollars. Finally, you want to make sure that the trust lasts 30 to 40 years.
When it comes to special needs trusts, you have two options. They include:
- Self-settled trust: Such trusts are funded with assets that belong to the person with the disability. Assets included here typically originate from personal injury settlements, alimony, inheritances as well as wages and personal savings.
- Third-party trust: Funded by other people – typically parents and grandparents – these trusts are created specifically to care for the child with special needs.
Special needs trusts contain many complexities and details that require the attention of a knowledgeable estate planning attorney. For example, they cannot be used to pay for food and shelter. However, a special needs trust can pay for education, computers, aides and equipment such as wheelchairs and hearing aids. A skilled attorney can guide you in preparation.