Creating Special Needs Trusts

Like many young adults, Maddie Black hangs out with friends, listens to music, and plays sports.  Yet, unlike many of her peers, Maddie has Down syndrome and will never be able to live on her own or financially support herself.  Fortunately, Maddie’s parents hope to leave money for her when they pass away.

“Part of the estate plan for all parents with a special needs child has to be creating a special needs plan.”  After determining the amount you want available for the care of your special needs child, a crucial step is ensuring that the money goes into a special needs trust.  “Just like you wouldn’t want to leave money outright to a minor, nor do you want to do that for a special needs child for similar reasons.  But you also do it to maintain the governmental benefits awarded to special needs kids.”

A special needs trust is not counted towards assets, which matters when qualifying for government aid.  The money in a special needs trust goes toward expenses beyond what is government funded.  This can include education programs, clothes or other extras.  Moreover, additional care expenditures might range from extra care for a few hours daily to round-the-clock help. 

Special needs trusts are unlike other trusts in that federal law protects them.  No one can challenge its validity as long as it meets certain requirements.  For example, special needs trusts must be created solely for the supplemental care of the beneficiary and cannot be managed by the beneficiary. 

See Sarah O’Brien, After You’re Gone: Parents of Special Needs Kids Bank on Trusts, CNBC, Nov. 3, 2014.