When you have a special needs child, setting up a trust to pay for your child's needs in the event of your death or incapacitation is virtually a necessity. No matter what your financial situation happens to be, a special needs trust can be enormously beneficial for your child.
First, your special needs trust will allow for the disbursement of funds to your child to finance his or her care without affecting your child's eligibility for vital government benefits. Second, even if you're not wealthy, you can finance the trust with a life insurance policy.
How to set up a special needs trust for your child
What follows is a checklist or action plan to ensure your special needs trust does everything for your child that you need it to:
Think about your finances: As a person with a disability, your child can receive a host of government benefits, including Social Security Income, Social Security Disability Insurance and Medicaid. When creating a trust and financial plan for your child, don't forget about your own financial needs. You'll need to decide how to finance your trust, whether you'll do it with an insurance policy or not, and whether you'll have enough money to pay for your retirement and needs.
Get your legal ducks in a row: You need to determine exactly what kind of assets will prevent your child from qualifying for various government benefits. The primary reason you're creating a special needs trust is to preserve these benefits for your child. One misstep regarding special needs trust planning could cost your child hundreds of thousands of dollars in inheritance and government benefits, so make sure you understand the law and have covered all your bases.
Put together your team who will support your child: To finalize your special needs trust, you're going to need a lawyer, a person who will serve as guardian and a trustee. Furthermore, ask your child for help when selecting these individuals as he or she will have an idea of who would be good to help provide needed care.
Write a letter of intent: A letter of intent will instruct the support team what shall happen for your child in the event that you die or become incapacitated. This will help ensure your child receives the kind of care you desire.
A special needs trust plan has a lot of moving parts
A special needs trust will have a lot of important components that need to be set up the right way, so your plans will be successful when you're no longer around to care for your child. As such, parents should study and learn as much as they can about the many legal options available to them in terms of special needs trust planning.