Provide For Your Special Needs Child

By Barbara Coenson
Attorney at Law

Many parents of special needs children dedicate themselves to providing a caring and fulfilling life for their child. But, what happens when the parents die? If you are a parent of a disabled child, a special needs trust can provide your child with the same support, care, and quality of life he or she has today, even after you are gone.

What is a Special Needs Trust? 

A special needs trust is a trust designed to protect assets for a disabled person while preserving that person’s public benefits. If your child has more than $2,000 in assets, then your child will not be eligible for public benefits. However, unlimited assets can be held in a special needs trust for your child’s benefit without risking the loss of public benefits. Public benefits such as Supplemental Security Income (SSI) and Medicaid can provide critical assistance to a disabled person. SSI pays for food and shelter and Medicaid pays for medical care.

Megan’s parent put $25,000 into a special needs trust to benefit Megan. When Megan applies for SSI, the $25,000 in the trust will not be counted to determine if Megan is eligible to receive SSI.

Maybe your child has already been denied SSI and Medicaid. When a child is under the age of 18, a parent’s income and asset resources can disqualify the child from receiving public benefits. When a child turns18, only the child’s resources are counted to determine eligibility. Establishing a special needs trust for your child could preserve eligibility for future benefits.

Marissa’s parents applied for SSI and Medicaid for Marissa when she was 10-years-old. Marissa was denied because of her parents income. When Marissa turned 18, Marissa reapplied for SSI and Medicaid and was approved because she owned less than the $2,000 limit. Marissa now receives cash assistance for food and shelter, and paid medical care. Marissa parents died and left $200,000 to a special needs trust for Marissa’s benefit. Marissa will have the benefit of the $200,000 in addition to the SSI and Medicaid. 

How Can Trust Funds be used?

Funds in a special needs trust can pay for many things for your child as long as the trust does not pay for services provided by public benefits. Your child will never receive trust funds; however, your child will benefit from whatever those funds purchase.

The funds in a special needs trust can pay for out-of-pocket medical and dental expenses, medical equipment not provided by Medicaid, education and vocational rehabilitation, caregivers, recreational and cultural events, athletic training and competitions, reading materials, musical instruments, hobbies, professional services, home improvements, computers or electronics, trips and vacations, entertainment, and much more.

How Do You Fund the Trust?

To fund a special needs trust, you and others can transfer money to the trust. The trust can also hold other assets such as real estate, vehicles, and investment accounts. Regardless of the value, an asset in the trust will not jeopardize your child’s public benefits.

A condominium owned by Frank’s family is transferred into Frank’s special needs trust. Although the condominium is worth $230,000, it is not counted as an available resource to Frank, so it will not affect his SSI eligibility.

Many parents and grandparents wish to leave money to a disabled loved one at death. Naming a disabled child as a beneficiary of a will, life insurance, or other type of inheritance could result in the child losing public benefits.

When Sam died, he left $25,000 to his son, Brad. Because Brad inherited assets over the $2,000 limit, Brad lost his SSI and Medicaid.

Family members who want to leave a disabled child an inheritance should name the special needs trust as the beneficiary of their will, revocable living trust, life insurance, or retirement plan.

Brett, a single father of two minor children, set up a special needs trust for his disabled daughter, Katherine. His will leaves half of his estate to his son, Drew, and half to a special needs trust to benefit Katherine. Brett also changed the beneficiary on his life insurance, 401K, and I.R.A. to Drew and Katherine’s trust. When Brett dies, Drew will receive half of Brett’s estate and the trust will receive the other half. The money in the trust will be used  for Katherine. Katherine will continue to receive public benefits.

Who Manages the Trust?

A trustee manages the assets in a trust. Parents or other family members can be trustees. You can provide special instructions to the trustee and successor trustees about activities you would like your child to participate in, where your child should live, what alternative health care treatments your child should have, what relatives your child should visit, and more.

Does Your Child Need Public Benefits?

With the spiraling cost of healthcare, even a million dollars may not be enough to last for your child’s lifetime. Medicaid can help offset the cost of healthcare, but only if your child qualifies. By putting your child’s inheritance in a special needs trust, most of your child’s healthcare can be paid by Medicaid allowing the inheritance to be used for other things that will improve your child’s life.

With public benefits paying for medical care and other basic needs, the funds you leave your child in a special needs trust could provide a better quality of life for your child, even after you are gone.

Lake Mary Life March/April 2009

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