Many individuals and families set up a trust as a way to provide for their children. This goal takes on added urgency when the child has special needs.
Fortunately, trusts come in many forms and are highly adaptable to many needs and situations. One type of trust, known as a special needs trust, can provide for a child with special needs both while the parents are alive and after they are gone.
When you set up a trust, you divide ownership in property between a trustee and the beneficiaries. The trustee has a fiduciary duty to manage the property for the benefit of the beneficiaries. The terms of the trust dictate how the trustee will disperse the property. For instance, the trust document may call for the trustee to invest the property and give the beneficiaries checks quarterly or annually. The amount of the checks may be stated in the trust document or may be dependent on how well the investment is going.
Another important point to remember is that you can set up a trust to go into effect during your lifetime or only after your death. Either way, the trust can continue providing for beneficiaries long after you are gone.
Special needs trusts
When setting up a trust for a child with special needs, parents must make some special considerations. For instance, they may want to appoint a guardian or advocate who can advise the trustee on the beneficiary’s medical needs and other concerns.
Another important consideration involves benefits programs. Many disabled people depend upon Medicaid and other government benefits programs that are only available to people of limited means. In some cases, a trust or inheritance can make a beneficiary suddenly ineligible for the benefits they need.
Long-term care is expensive, and a sudden influx of cash can mean a beneficiary loses their benefits while being unable to afford to pay for their care by themselves. Many people with special needs are unable to address this problem on their own.
A special needs trust can avoid this problem by giving the trustee instructions on how to disperse funds to the beneficiary without destroying their eligibility for benefits.
This type of trust can go into effect during the parents’ lifetimes and continue after their deaths. It can carry on through the child’s lifetime and then, if there is anything left over, disperse to another set of beneficiaries.
In this way, loving parents can provide a legacy that lasts well into the future.