What is a special needs trust?
Ensuring their children are cared for after their death is a primary concern for any parent of a special needs child. Children with disabilities often have increased financial needs and may require additional planning to make sure their needs are met in the event of the death of their primary caregiver. A simple will is rarely enough when you have a child with special needs. Our Orange County estate planning lawyers discuss some important estate planning considerations for the parents of children with special needs below.
Special Needs Trusts
Passing down your assets to your disabled child comes with some difficulties because a bequest of even a small amount of money could potentially render your child ineligible for benefits. Most individuals with serious disabilities will apply for and receive some form of benefits, mostly in the form of Medicaid or SSI. These benefits are essential given the tremendous expenses associated with long term medical and other care.
Special needs trusts, also known as supplemental needs trusts, are the best option when it comes to protecting a child or other relative with special needs. A special needs trust allows parents to give assets to their child, while not impacting their eligibility for benefits. There are several different types of special needs trusts, each with different benefits depending on the needs of the family. First party trusts can hold the beneficiary’s assets, with funds being used for their benefit during their lifetime. Upon their death the assets are then used to reimburse the government for costs associated with medical care.
Third party special needs trusts are used mostly by the parents of disabled children. These trusts can hold a wide array of assets, including homes and stocks. Funds can be used for the care of the disabled individual and there is no payback provision, allowing left over funds to be passed down to other relatives. Lastly, pooled trusts allow beneficiaries to pool their resources with other beneficiaries. The beneficiaries benefit by investing their funds together, but accounts are still kept separate.
Special needs trusts are just one of many types of trusts that the parents of special needs children can use to protect their loved ones. Contact an estate planning lawyer to find out more about special needs trusts, ABLE accounts, life insurance, and much more.