If you have a disabled child, you probably have some concern about his or her care after your death. While medical care and living costs can be expensive, your son or daughter may be eligible for needs-based government benefits, such as Supplemental Security Income or Medicaid.
In your estate plan, you may want to leave funds to your child. If you do, though, he or she may have too much income or too many assets to qualify for public assistance. Setting up a special needs trust may be a valuable part of your overall care strategy.
Forming a special needs trust
A special needs trust does not transfer ownership of your assets to your son or daughter, so disbursements from the trust typically do not qualify as income for needs-based public programs. Still, your child may only use funds to pay for certain expenses.
Using special needs trust funds
Public programs usually provide meager financial assistance to eligible recipients. While these programs may fund medical care and basic living expenses, they do not usually cover much else. Funds from the special needs trust may pay for supplemental expenses, including the following:
- Out-of-pocket medical care and copays
- Therapy and rehabilitation
- Entertainment and recreational expenses
- Travel costs
- Other ancillary expenses
Naming a trustee
Special needs trusts have another key component that may benefit your disabled child. When you form one of these trusts, you designate a trustee. This trustee has a fiduciary obligation to look out for your child’s interests.
The trustee may help your son or daughter access necessary services. He or she also ensures trust disbursements do not inadvertently jeopardize public assistance.