If you have a child who has special needs, you may manage their finances on a regular basis. Have you given any thought as to how their financial needs will be managed in the event that you become incapacitated by illness or injury or pass away? If your child will one day be in a position to manage their finances to a limited extent but could benefit from ongoing oversight, have you thought about how you might manage that situation?
If either of these scenarios applies to you, you may wish to speak with an estate planning attorney who has extensive experience with the creation of special needs trusts. It is especially important that you work with someone who is knowledgeable about these trusts specifically, as you’ll want to make sure that any trust you create for your special needs child preserves their eligibility to receive needs-based government assistance and/or benefits. An attorney who is unfamiliar with these specific kinds of trusts may not know how to take necessary steps to preserve these interests.
What Does a Special Needs Trust Do?
A special needs trust can serve a variety of functions. As mentioned above, when properly structured, it can help to preserve your child’s eligibility for government aid and benefits. Most special needs trusts (known as supplemental trusts) accomplish this aim through their “ownership.” Meaning, your child won’t own any assets placed in the trust. Therefore, the assets in the trust that provide for your child’s needs aren’t considered their income. If reported as income, these assets could nullify your child’s eligibility for aid and benefits. This resource safeguards eligibility while allowing parents to adequately meet their child’s financial needs.
If you opt to create a first-party special needs trust – which is commonly referred to as a self-settled trust – you can fund it with assets that DO belong to your child. To get around reporting these assets as income, you’ll need to make the trust irrevocable. If your child receives Medicaid, you’ll also need to indicate that Medicaid will receive some reimbursement from the trust either upon its termination or your child’s death. Finally, this kind of special trust cannot be used for any purpose other than benefitting your child directly.
Exploring Your Options
As an experienced Roseville, CA trust attorney – including those who practice at Yee Law Group Inc. – can confirm, your child with special needs may benefit from additional estate planning tools as well. Contact a local estate planning lawyer in your area to learn more.