While it is important for everyone to create an estate plan as they grow older, doing so is particularly important for you if you have a disabled or special needs child who will require considerable care in your absence. Providing lifelong care for your disabled child can cost millions, and one effective method of making sure your child has access to what he or she needs involves creating what is known as a special needs trust.
Creating a special needs trust, which you can fund using life insurance, among other avenues, gives you an opportunity to provide for your disabled child without limiting his or her ability to obtain assistance through other methods.
Key benefits of the special needs trust
Arguably the biggest benefit of creating a special needs trust is that, in doing so, you can leave your child assets without impacting his or her eligibility for government benefits. If, for example, your child is a recipient of Supplemental Security Income, or if he or she utilizes Medicaid, he or she must have first qualified for said benefits after undergoing means testing.
In other words, these types of benefits provide assistance for people who do not typically have the means to provide for themselves otherwise. If you leave assets behind for your disabled or special needs child in a simple will, the money you leave could potentially make him or her ineligible for assistance moving forward. When you fund your special needs trust using life insurance or other assets that do not belong directly to your child, you are giving the child the ability to use them after your passing without them factoring in during means testing.
While giving your disabled child the ability to stay eligible for government benefits is a key benefit of a special needs trust, it is not the only perk associated with establishing one. In doing so, you can also stipulate that the assets you leave inside go to charity or someone else once your child passes on and can no longer utilize them.