Trusts for Disabled Children: How to Choose which trust is right for your child’s future
You already know you have to plan your estate carefully to provide the best quality of life for your child. But did you know there are several types of trusts to care for special needs children? The most common types are Support Trusts and Special Needs Trusts.
A Support Trust mandates that the trustee make distributions for the child’s support of such basics as food, shelter, clothing, medical care, and educational services. Beneficiaries of Support Trusts are ineligible to receive financial assistance through Supplemental Security Income (SSI) or Medicaid . Therefore, if your child will require SSI or Medicaid, you should avoid a Support Trust.
Special Needs Trusts
For many parents with a special needs child, the use of a Special Needs Trust is the most effective way to help the child. It manages resources while maintaining the child’s eligibility for public assistance benefits. There are two types of Special Needs Trusts: Third-Party and Self-Settled.
Third-Party Special Needs Trust – Created using the parent’s assets as part of an estate plan – distributed either by will or living trust.
Self-Settled Special Needs Trust – Generally created by a parent, grandparent or legal guardian using the child’s assets to fund the trust – when the child receives a settlement from a personal injury lawsuit and will require lifelong care. If any assets remain in the trust after the beneficiary’s death, a payback to the state is required.
Either type of Special Needs Trust helps provide a desirable quality of life for the disabled child while maintaining public assistance benefits.
Lawrence Eric Davidow is a founding member and the Treasurer of this premier alliance of leading law firms throughout the country who are dedicated to the area of planning for those with Special Needs.