Whether your child has a mental illness, developmental issue or physical disability, you may currently be relying on government benefits to provide the specialized care he or she needs.
Unfortunately, programs like Medicaid and Supplemental Security Income often put strict limits on a recipient’s financial resources. Your child may lose eligibility for care if he or she inherits money from you directly after your death.
A special needs trust is an estate planning tool that may allow you to preserve funds for your child’s future use while maintaining his or her eligibility for important government benefits.
How a special needs trust works
Also called a “supplemental trust”, an SNT provides your child with funds for supplemental needs that go beyond government assistance. Items the trust can pay for may include medical expenses, transportation costs, travel, entertainment and education as well as personal belongings like clothing or furniture.
Because your child might lose eligibility for government aid if he or she received money directly from the trust, your trustee rather than your child may pay for these supplemental expenses. So long as your child does not have direct access to trust assets or receive payments as a beneficiary, funds in the SNT may not affect his or her eligibility for Medicaid or SSI.
Benefits of an SNT
In addition to keeping your child eligible for public benefits, creating a special needs trust may help ensure your child enjoys the quality of life you envision. With careful planning, an SNT can provide you with reassurance that the assets you invest will benefit your child for years to come.