Setting Up A Special Needs Trust
Parents of disabled children should plan for their disabled children. Parents have essentially only four options:
- Either disinherit the disabled child,
- Distribute assets to the child,
- Distribute assets to the sibling of the disabled child and rely on the sibling to take care of the child; or
- Distribute assets to a Special Needs Trust.
The use of a Special Needs Trust allows the child’s inheritance to be placed in trust for them without affecting the child’s eligibility to receive public benefits. The assets in the trust would be used to supplement the public assistance benefits.
The other three options have drawbacks. Leaving the disabled child’s share to a sibling exposes that share to problems of the sibling, such as divorce, lawsuits, and bankruptcy. Distributing directly to the disabled child would render the child ineligible for SSI and other public assistance programs. Finally, completely disinheriting the disabled child is often contrary to the parents’ wishes.
A Special Needs Trust solves the dilemma. The trust provides that no distribution of income or principal may be made that would reduce the amount of public benefits to which the child would otherwise be entitled. The trustee of the trust is allowed to use the money for educational programs, vacations, telephone charges, personal gifts and anything to enhance the child’s life except basic food, clothing, or shelter.
If any of your beneficiaries are receiving or likely to receive public benefits, you may wish to consider a Special Needs Trust.
The information provided herein is for general purposes only and does not purport to give specific advice on individual matters. If you want individual advice, contact Mary Howie, an Elder Law and Estate Planning attorney practicing in New Hampshire and Massachusetts. Attorney Howie also holds a master’s degree in business administration and finance. Call her at 603-893-8008.