Estate planning is one of the best ways to provide for your family when you are gone. When you have a disabled child, it’s even more important to have a plan in place before you actually need it since they will likely need ongoing assistance. While many people set up trusts to distribute funds to their children, your disabled child might benefit from a specific type of trust known as a special needs trust (SNT). The following guide goes over what you need to know about creating an SNT for a disabled child.

What Is a Special Needs Trust?

A special needs trust is a legal document that outlines your wishes for the distribution of funds from your estate to support your disabled child. Since many public benefits require the recipient to qualify as having low income or few assets, you don’t want to leave a large inheritance directly to your disabled child because those assets might disqualify them from receiving government benefits. An SNT protects them financially by distributing funds in a way that does not interfere with any government assistance the child might be eligible to receive. 

Funds in an SNT generally pay for expenses that would not otherwise be covered by public benefits, including:

• Education
• Clothing
• Food
• Vacations and travel
• Hobbies
• Entertainment
• Support services (e.g., a personal care attendant; Meals on Wheels, etc.)
• Certain therapies and out-of-pocket medical care

How to Set up a Special Needs Trust

There are several important steps to take when setting up an SNT.

Choose a Trustee

First, you want to designate a trustee who will be responsible for managing the assets on your child’s behalf. Some important considerations when choosing a trustee include that the person is trustworthy, is willing to serve in this capacity, is young and healthy enough to help your child long-term, has a good relationship with your child, and has the appropriate knowledge and ability to manage finances and comply with legal requirements.

Draft the Trust

Consult with an experienced estate planning attorney who specializes in special needs trusts to help you draft your document. Working with a professional will ensure that your trust is in compliance with relevant state and federal laws and will not interfere with government benefits like Medicaid or Supplemental Security Income. They can also assist you in assessing the future needs of your child and in clearly defining how the funds should be used.

Fund the Trust

After you have created the SNT, you can decide what assets you would like to fund it with, including cash, real estate, investments (including stocks and bonds), and other assets. On your life insurance policy, you can list the SNT as the beneficiary, so assets will transfer to the trust rather than directly to your child. You can also set up the fund so that other people, such as family members, can contribute as well. 

Want to Set Up a Special Needs Trust? We Can Help!

Establishing a special needs trust is a thoughtful step you can take to help safeguard the financial future of your special needs child. Our estate planning group at Lonich Patton Ehrlich Policastri has significant expertise in preparing estate planning documents, including SNTs. Contact us today to schedule your free consultation where we can discuss your unique situation and go over your options with you. 

Disclaimer: this article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.