In its simplest form, estate planning requires careful consideration. When you are the parent of a child with special needs, it’s even more critical that you make the right choices when planning for your family’s future. One of those choices is whether to set up a special needs trust.
The decision is an important one if you want to continue supporting your child with special needs after they become a legal adult. Here are three reasons you should consider creating such a trust.
1. You Want Your Child to Continue Receiving Benefits
Many adults with special needs rely upon public benefits such as Supplemental Security Income (SSI) and Medicaid. If you want to continue to support your child with special needs after they turn 18 without jeopardizing their benefits, a special needs trust can help ensure that they continue receiving them. If you were to simply give them money to live on, they would have to report that as income, which could put them over the income limits for their benefits.
When you set up a trust instead, you can protect those benefits. Because the trust holds the assets that you fund it with—whether it is property or money—your child does not actually own those assets. As the beneficiary of the trust, the income that they receive will not affect their benefits. However, the income that your child receives from the trust must be supplemental. As an estate planning tool, though, a special needs trust is a great way to provide your adult child with a higher quality of life.
2. You Want to Ensure the Funds Are Used Only as Intended
Leaving an inheritance to a child without the protection of a trust allows for abuse to occur. You might think that you leave your estate to a trusted relative with the stipulation that it be used for the benefit of your child. But too many times, this type of arrangement leads to bad decision making and betrayal. Without the protection of a trust, the estate you leave behind is subject to misuse and can be seized for outstanding debts.
If you want to ensure that the funds you leave behind are used how you intend them to be used, creating and funding a trust might be right for your situation.
3. A Special Needs Trust Allows Others to Contribute
By establishing a trust now, you can multiply the amount of support that your child with special needs can receive in the future. How? By encouraging others, such as grandparents, to contribute to the trust. Anyone who wants to help can give up to $15,000 per year without incurring the gift tax.
Wondering Whether a Special Needs Trust Is Right for You?
The decisions you make regarding your estate plan can have consequences in the future. Want to make sure that you are making the best, most educated choice that you can so that your child with special needs can enjoy the quality of life that you want for them? I’d love to talk to you. Set up a meeting with me today so we can discuss how to approach your estate plan.