How can a trust help with special needs planning?
A trust has two key components to helping you with special needs planning - whether it be for your child or another beneficiary that you would like to be able to provide support for after you are gone.
Separation of Assets
While there are circumstances where a special needs or disabled child could manage money for themselves, if a person receiving government benefits ends up inheriting assets directly then it could interfere with the eligibility of those government benefits.
In order to understand whether your child can receive an asset directly, you will need to review the eligibility requirements for that particular benefit.
For example, one common point of confusion is receiving supplemental security income (SSI) versus social security disability insurance (SSDI).
SSDI is based on a person’s disability and work history, whereas SSI does not depend on work history but is intended to be more of a needs based program for those who have limited resources. For that reason, SSDI does not have the same asset or income rules as SSI.
So, if you’re a parent providing for a child receiving or expecting to receive SSI, you will want to make sure that even if you are gone, there is a way to continue to provide additional help to that child without disrupting those benefits.
That’s where the trust comes in.
By having a properly structured trusts (common referred to as a special needs trust or a supplemental needs trust), you do not have to worry about the child losing those benefits because the trust would be able to hold the assets for the benefit of that child and by doing so the trust acts a proxy for the parent for the remainder of the child’s lifetime.
The key here is that the trust supplements but does not supplant those benefits. Like most things in law, the wording is key in order to make sure you create the best financial outcome for your family.
2. Naming a Trustee
In many situations the child is either not able to manage the money themselves or maybe you have someone in mind who you feel would be in a better position to make financial and investment decisions on behalf of your child.
Once again, this is where the trust comes into play.
When you have a trust, you can name someone to continue to manage the trust for the benefit of your child after you're gone - this person (or manager of the trust) is called your “trustee.”
Since there needs to be legal separation between the child and the assets for eligibility purposes (as mentioned above), the trust gives you the benefit of not only allowing that eligibility to continue, but also give you peace of mind in knowing that someone your trust is overseeing how that money is being used for the benefit of your child.
If you’d like to learn more about how supplemental needs trusts, or if you’d like me to review or create one for you, then feel free to schedule a call today by clicking the link below. I’m always happy to help!
