One of the best ways to protect your children’s future is to create a will and designate them as beneficiaries. That way, they will be taken care of after you and your spouse are deceased. This may seem simple enough, but the process becomes much more complicated if you are the parent of a child who has special needs.
If you are planning an estate and have a child with special needs, it may behoove you to consider a special needs trust. This type of trust can protect someone who has special needs in ways that a regular trust fund would not. Read on to learn more about whether a special needs trust is right for your family.
What is a special needs trust?
A special needs trust is a specific type of fund that is designed to meet the unique needs of a beneficiary who has a disability. Frequently, these trusts are used to ensure that the beneficiary does not lose any of his or her government benefits. In other situations, they are used to protect the assets bequeathed to a vulnerable adult.
Why make a special needs trust?
One of the major reasons to create a special needs trust is to protect the Medicaid, Supplemental Security Income, and other government-funded benefits of a beneficiary. Receiving a large sum of money may disqualify someone from receiving government-funded assistance. Because a special needs trust is controlled by a trustee, it won’t affect the recipient’s eligibility for assistance programs.
How does the beneficiary use the trust?
Typically a trustee will purchase goods and services–such as personal care attendants, medical supplies and physical therapy– on behalf of the recipient. This is because giving the recipient could risk losing their government benefits if they withdraw money directly from the trust.
What about pooled trusts?
Another option for children who have special needs is a pooled trust. In this type of trust, a nonprofit organization shares money from various donors and distributes it between many beneficiaries. Nonprofits even appoint trustees for each fund. Families who are unable to decide on a particular trustee may be good candidates for a pooled trust.