If your child is disabled or has some other type of special needs you probably already have your hands full with caretaking and ensuring the child’s daily needs are met. On the other hand, you should also take into consideration your child’s financial needs as well. You will want to create an estate plan which helps ensure your special needs child will be taken care of in the case of your death. One way to do this is through a special needs trust.

Goals of a special needs trust

Using a trust-based estate plan for your special needs child requires attention to your child’s particular situation since many special needs children are recipients of social welfare programs such as Social Security Income (SSI) or Medicaid. Therefore, it is necessary to design a trust to ensure preserving eligibility for public assistance while also providing for the long-term financial stability of your special needs child.

Since the funds being left to your special needs child are being held in the trust, the money and other capital are not counted as income and are not taken into consideration when determining eligibility for social welfare programs. The appointed trustee will manage the funds for the benefit of your special needs child and ensure that the use of the funds will not cause loss of eligibility for public benefits while still providing a certain quality of life for your child after you are gone.

What would funds in the special needs trust be used for?

The capital in the special needs trust fund can be used for numerous types of expenses related to caretaking for your child. Some of these costs may include housing, medical care, transportation, clothing, furniture, educational supplies, and more. You can provide the trustee with instructions that provide guidance on how funds should be used to maintain and increase your child’s quality of life.

When should you create a special needs trust?

The right time to start a special needs trust will depend on your particular needs. One option is to include the special needs trust into your own estate plan. This means the trust will be activated upon your passing away. Using this method you will be providing financial support for your child for the longer term.

Another option would be to initiate a special needs trust while you are still alive. This is known as a living trust which would allow other family members, such as grandparents to also contribute capital to the trust.

How do I start a special needs trust that is best for my child?

The details on creating the special needs trust and guidance on how funds should be managed will depend on your specific circumstances. This is something you should take seriously since making a strategic mistake can have serious consequences for the quality of life of your special needs child. You may be able to obtain more clarity on the best way to go about it by talking with a professional wealth management advisor.

The information contained within this blog has been obtained from sources considered to be reliable, but Raymond James does not guarantee the foregoing material is accurate or complete. Any opinions are those of the author and not necessarily those of RJFS or Raymond James. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.