If you care for a dependent with special needs, you may worry about who will care for them when you no longer can. This can feel overwhelming, but financial stability can go a long way to preserve their quality of life. Unfortunately, state-appointed guardians and even family members may exploit assets left for special needs and disabled people.
Trusts provide better opportunities for you to protect their financial interests than most other options. However, there are many different types to choose from. Do you know which one is right for you?
Some special needs individuals have assets to protect. You may have protected these assets on their behalf for several years and want to ensure they remain in good hands. A first-party trust may help you achieve this. Assets may come from inheritances, life insurance payouts or assets earned before becoming disabled. According to Forbes, while this may protect their Medicare eligibility, the trust may need to repay the balance after the individual passes.
To avoid this repayment clause, most family members choose third-party trusts. This allows you to pool your assets into a trust to safeguard the special needs person. If family members prefer not to transfer assets into the special needs trust, you may consider using life insurance policies that pay into the trust upon your passing. Families often use a combination of these options.
Trusts present one of the most common solutions families use when planning for special needs people. However, they tend to work better when coupled with other special needs planning tools.