You have a wonderful child. They’re bright, sweet, and caring, and you wonder how you could ever have gotten so lucky. Your child also has special needs, which sometimes keeps you up at night worrying about what will happen when you can no longer take care of them.
Sitting down and making a plan for your child’s future can be a daunting task for any parent, but it is an important one, especially for those parents who have children with special needs.
What is a Special Needs Trust?
When someone you love has a mental or physical disability, a great way to help provide for their future is by setting up a Special Needs Trust, which is also known as a Supplemental Needs Trust. Simply put, a Special Needs Trust allows you to put an unlimited amount of assets into a trust for your special needs child, either now or upon your death. Placing assets into a trust, rather than passing them directly to your child, can help preserve their eligibility for certain government programs and assistance such as Supplemental Security Income (SSI). The purpose of this trust is to provide supplemental assets for your child’s care and wellbeing, while still allowing them to qualify for government benefits.
To make the explanation easier, here’s a scenario: lets say you have a son with Downs Syndrome. He is the light of your life, but you know that when you’re no longer around, his living situation will likely change. He may ultimately live with a trusted relative or family friend, but you know he won’t be able to live independently.
You pray that you have plenty of time to plan for that, but life doesn’t always work out the way we hope. If something were to happen to you before your plans were drawn up, the courts would likely appoint a guardian for your son and an administrator for what would then become HIS assets. Those assets could potentially disqualify him from receiving any additional government assistance. Some simple planning would have allowed you to decide on who would be your son’s guardian, and who would look after your money, rather than allowing a judge who doesn’t know your son to do it.
Additionally, setting up a Special Needs Trust would allow your assets to be distributed for your son’s benefit by a trustee (whom you can select), in the ways you feel would be best. For example, your money could be used to ensure that he always has money available to go bowling or horseback riding, afford trips to visit other family members, or even allow him to buy birthday presents for his siblings. In other words, he could continue to receive government support while still having access to additional assets to make his life easier-the best of both worlds.
Picking a Guardian and a Trustee For Your Child
The guardian you name to care for your child and the person you want to safeguard, invest, and distribute your money for their benefit don’t have to be the same person. They could possibly be one and the same, but they don’t have to be. The guardian you choose should be the person who will love and care for your child the way you would. The trustee could be a relative, trusted friend, or even a bank or other financial institution. The important decision here is that the trustee be good with money, and someone you trust. It is important to be aware that a corporate (bank or institutional) trustee will always charge a percentage of the trust’s assets for administering the trust, but they may still be the best choice for your situation.
What if You Just Leave All Your Money to Your Child Without Special Needs, Knowing They’ll Take Care of Their Sibling?
Ummm…it might not necessarily work out that way. That’s not to say your child who isn’t special needs doesn’t love the one who is. We never know what the future holds, and there are numerous situations where the one sibling won’t be able to use all of the given money to care for the other. For instance, once your assets are passed to the other child, they legally become theirs and could be exposed to:
If they should die before their special needs sibling, the money would probably go to their spouse and children, not their sibling. Once the assets are passed, there is no way to legally force anyone to share that money with your special needs child.
The Bottom Line
Having a child with special needs can be incredibly rewarding and overwhelming too. One of the best ways to provide for your child is to plan for their future. If you have any questions about this or any other planning concerns, please contact us for more information-we would be happy to help.