If you have a child who has a disability or special needs, you may worry about his or her future. After all, while you understand how to care for the young one in your family, you recognize you will not be around forever. When planning your estate, you may want to set up a trust to improve your child’s future quality of life.
Individuals with disabilities are often eligible for government assistance, such as Supplemental Security Income or Medicaid. These programs, though, typically require recipients to have few assets and limited income. Consequently, gifting money to your child may push him or her over the asset limit.
A special needs trust is an effective workaround
Setting up a special needs trust may allow your child to use money without jeopardizing his or her eligibility for government benefits. That is, rather than transferring money to your son or daughter, the special needs trust holds it for his or her use. This, of course, may keep your child under the asset threshold for government help.
Your child can use funds for supplemental expenses
Before you establish a special needs trust, you must understand the trust’s limitations. Specifically, your child may not use disbursements from the trust to pay for the same expenses that government benefits cover. Generally, food, utilities, shelter and basic medical care are off-limits. Supplemental expenses, like hobbies, uncovered medical care, home modifications, vacations and rehabilitation, are usually permissible, though.
If you are looking for some peace of mind, setting up a special needs trust may help you achieve it. By giving your child access to funds while preserving his or her eligibility for means-tested government benefits, you ensure your son or daughter has what he or she needs to thrive.