When planning for the support of children with disabilities a living, or stand-alone, special needs trust can be an important tool. On a basic level, a special needs trust is a trust designed to receive and hold assets while still allowing the trust beneficiary to maintain eligibility for government benefits. In the absence of a trust, gifts or assistance given to a disabled individual could endanger their eligibility for means-tested government benefits. In terms of Medicaid coverage, a loss of eligibility could mean they lose access to health care until they regain eligibility.
Establishing and providing funding for the trust now, before the death of the beneficiary’s parents, or other relatives/legal guardians, helps to secure the financial well-being of the beneficiary and allows for the trust to begin operation now to ensure that the trust legally does what it was designed to do. A special needs trust must be carefully drafted by an elder law attorney to make sure that a trust conforms with current regulations that can vary by state and change over time. If there turns out to be a problem, it is important that there is still time for the beneficiary’s parents or guardians to replace the problematic trust with one that works as intended.
Once established, the trust can act as a vehicle to collect money from various sources. Not only can the trust be funded directly, but it can also be made the beneficiary of insurance policies, pension plans, or other instruments that can transfer upon death to a named beneficiary. The trust also allows for other relatives and family friends to contribute to the well-being of the trust beneficiary.
Funding a special needs trust now also helps to protect a disabled child from the potential incapacity and insolvency of his or her parents. If the parents of a disabled child become incapacitated, then there will still be the trust to help provide for the child. Otherwise, a prolonged parental incapacity could end up draining the parents’ estate to the point where there is nothing left for the disabled child.
The creation of a special needs trust for the care of a disabled child and planning for your own future needs requires careful planning and can involve many options and considerations. Please call Martha C. Brown and Associates at (314) 962-0186 to begin making a plan that meets your and your family’s needs.