Do I Need a Trust if My Child is Disabled?

We all worry about what may happen to our loved ones when we die, but parents with children who are disabled can carry an additional burden of concern - even when those children are adults themselves. Whether they need significant help in their daily activities or have a severe mental or developmental disability, you no doubt wish to continue providing what assistance and support they may need, even after you’re gone. They’ll face many challenges in life without the struggle toward financial security being one of them.

However, there are many considerations to leaving your disabled child a large financial gift from your estate, and one of the most basic considerations is in what form that inheritance should take. A large sum of money could limit your child’s access to government programs like Supplemental Security Income (SSI) and Medicaid, and it could attract unscrupulous people aiming to take advantage of someone with mental or physical disabilities. When planning your estate, consider a special needs trust.

What is a Special Needs Trust?

A trust is created when a settlor (for example, you) transfers property (whether real estate, a financial sum, or other property) to a trustee (an individual you appoint) for the benefit of a beneficiary (for example, your child). You might establish a trust to ensure your property is distributed exactly according to your wishes upon your death - or to provide for your family, or to save your family time and paperwork by avoiding probate. In the case of a special needs trust, you’re specifically setting aside property to benefit your disabled child without affecting their eligibility for needs-based government programs like Medicaid.

Another important benefit of a special needs trust is that the money cannot be touched apart from serving its intended function in benefiting your child. The trustee can purchase necessities for the beneficiary, such as products (home furnishings or amenities, medical equipment, and more) or services (vacations or recreational outings, personal attendants, and so forth). However, if you are sued or your will is contested, the funds in the special needs trust you have established cannot be touched; the same is true if your child is sued. A valid special needs trust is judgement-proof.

Advantages of a Special Needs Trust

Medicaid can be a crucial component in taking care of your disabled child’s health costs, and it’s only available to people with severely limited income and resources who also qualify for SSI. If you leave your child a lump sum inheritance, they would be ineligible for these government programs until they run out of funds. A better way to support your disabled child is by establishing a special needs trust - which doesn’t count toward their assets and protects their eligibility for these programs.

Putting this money beyond the reach of your disabled child can provide a layer of protection against opportunistic individuals trying to take advantage of them. If your child has a mental disability, the peace of mind a special needs trust can provide is invaluable. Even someone who can make their own decisions about their daily lives but are emotionally vulnerable due to their physical disability can benefit from this protection. A special needs trust can ensure your child’s best interests are paramount.

Other Things to Consider

There will be some cost to set up a special needs trust and ensure it’s properly managed, not to mention assessment of taxes annually and the matter of a trustee’s fee. In general, you can expect to spend a few thousand dollars setting up a special needs trust. Trustee fees vary, but are set by your local County probate court. They are generally in the 1-2% range (as measured by total assets of the trust).

Additionally, your child does not have full control over the assets. They cannot use their own discretion to provide for themselves, but must go through the trustee for every purchase - and abide by their trustee’s decision on every request. It’s incredibly important to choose the best and most trustworthy trustee for this reason.

When all is said and done, it’s better for your disabled child to have a special needs trust to ensure their continuous care through government-supported programs while also providing for their material needs. The care and legal experience involved in creating a special needs trust is exacting, and its critical no mistakes are made that could cost your disabled child any required care. Are you ready to continue caring for them after you’re gone? Give my office a call today to get started in taking care of their future.


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