Even though having a child with special needs can be challenging, your parent-child relationship is likely among the most significant ones you have. Still, if your son or daughter has physical, developmental or other disabilities, you may worry about his or her future. Specifically, you want to be sure the young one in your family has sufficient financial resources to thrive throughout life.
Eventually, your child may qualify for government benefits, such as Supplemental Security Income or Medicaid. Because these programs require individuals to pass a means test, though, you do not want your financial support to be disqualifying. A special needs trust as part of your overall estate plan may be the solution.
The purpose of special needs trusts
A trust holds assets for the benefit of an individual or entity. This is an important distinction, as it does not transfer ownership of property. With a special needs trust, you retain ownership of your wealth while placing assets in a fund where your child may access them. This typically allows your son or daughter to accept needs-based governmental benefits. Nonetheless, for this approach to work, the trust must provide supplemental support. That is, it cannot support the basic needs of your son or daughter. On the contrary, it must only enhance his or her life.
Some common types of special needs trusts
While trusts come in a few different types, special needs ones usually take one of two forms: a first-party trust receives funds that belong to the individual with special needs. If your son or daughter has an insurance settlement or inheritance, for example, establishing a first-party trust may make sense. Third-party trusts, by contrast, come from assets that someone else owns. If you have resources to fund the trust, a third-party trust may be right for your family.
Improving the quality of life for a child with special needs does not have to cause you anxiety. Rather, with the right estate planning, you can ensure your young one has the necessary resources to succeed throughout adulthood.