Estate planning for families with special needs children can be a complex and delicate process. It is not just about protecting the child’s well-being and financial security. You would also want to preserve their eligibility for needs-based public benefits.
Thankfully, there are available options that can help your family achieve both.
Establishing a special needs trust (SNT)
There are several types of special needs trusts, including:
- First-party SNTs are established with the beneficiary’s own assets, such as inheritance or settlement funds. Beneficiaries who have a short-term need for public benefits, like a minor with special needs commonly use this.
- Third-party SNTs are established with assets from a parent, grandparent or other family member. These are common for beneficiaries who have a long-term need for public benefits.
- Pooled SNTs allow multiple beneficiaries to share the same pool of funds, which can be a cost-effective option for families with multiple children with special needs.
Special needs trusts aim to provide for the beneficiary’s needs without disqualifying them from receiving needs-based public benefits. The trust can be used to pay for a wide range of expenses, including:
- Medical care and equipment
- Housing and transportation
- Education and vocational training
- Recreational activities and entertainment
- Personal care and support services
Typically, a trustee manages a special needs trust. They are responsible for distributing the assets to the beneficiary according to the terms of the trust. The trustee can be a family member, a friend or a professional trustee.
It is important to note that special needs trusts can be complex and have specific legal requirements. It is still best to consult an attorney to ensure that you can establish and administer your trust according to your will.
Are there other options available?
Overall, special needs trusts can be a valuable tool for families with special needs children, but it’s not the only option that can preserve public benefits. Other options include:
- ABLE accounts: The Achieving a Better Life Experience (ABLE) Act allows families to save for their child’s qualified expenses, such as education, housing and transportation. Contributions to ABLE accounts are not subject to federal income tax, and certain states also offer state tax benefits.
- Life insurance: Families can use life insurance to provide financial support for a child with special needs after their parents are no longer alive. They can purchase these through an employer or privately. They can use the proceeds to fund a special needs trust or other financial planning tools.
In conclusion, estate planning for families with special needs children requires careful consideration and professional advice. By exploring the options available, you can provide for your child’s well-being and financial security, while also preserving their eligibility for needs-based public benefits.