Understanding Special Needs Trusts

Understanding special needs trustsIn our line of work, we see plenty of heartbreaking cases where special needs individuals don’t get the support they need. In one case, a mentally challenged adult child was the beneficiary of his parents’ assets. When they died, he received the house and the money. He had enough cognitive ability to manage basic daily tasks and live on his own, but he struggled to manage the money and the home, and was quickly taken advantage of by other people. Soon enough, he was penniless and homeless, and never understood why.

Leaving behind a child with special needs when you die is a crippling thought for many parents. One way to make sure your child is taken care of – not taken advantage of – is to create a special needs trust.

What is a special needs trust?

A trust is like a bowl of candy in which the candy represents the assets placed in the trust. The trust contains instructions on who can the eat the candy and when. Special needs trusts contain specific language that provides financial security for your loved one with special needs, while maintaining their eligibility for public benefits.

Why do I need a special needs trust?

Public benefits, such as Medicaid, are available to help those who could not otherwise afford necessary living expenses such as food, housing and healthcare. If a special needs person has assets totaling more than $2,000, they are typically not eligible for these public funds. A special needs trust allows your special needs child to have any amount greater than $2,000 and still receive public benefits. The money in the trust can be used to pay for extras that those public benefits won’t cover, like internet, a cell phone or travel expenses.

Who looks after the trust and my child?

A trustee is the person you appoint to manage the trust, providing your child with additional funds as appropriate. The trustee can be a sibling or other family member, a close friend or a bank. The only detail you don’t want to skip over is that the trustee is responsible and, well, trustworthy. The responsibility of looking after your child may fall to a guardian, which can be, but is not always, the same person named as trustee.

There are plenty of ways to care for a child with special needs, thanks to various public programs. These programs differ from state to state, and when you die, your child is at risk of being left to fend for themselves. In the case that they unable to do so because of their cognitive disability, a special needs trust provides them with important additional financial resources.

Contact our office for a special needs trust consultation or to begin creating a trust for your special needs child.