Navigating Special Needs Trusts for Children with Disabilities

Setting up an estate plan that involves a special needs child can be an overwhelming task to not only contemplate how your child will be taken care of after you passing, but also to ensure that your child will receive the medical and financial benefits they are eligible for while still inheriting from you.

There are three special needs trusts that can allow your child to receive assets from you after your death but still maintain state and federal aid eligibility:

• Self-Settled Special Needs Trust- made from the assets of the person receiving aid.
• Third Party Supplemental Needs Trust (Third Party Special Needs Trust or Stand-Alone Third Party Supplemental Needs Trust)- made from the assets of any person other than the person receiving or applying for aid.
• Testamentary Third Party Supplemental Needs Trust (Testamentary Third Party Special Needs Trust)- this trust is similar to the previous trust but it is created upon the death of the person intending to create the trust, and the provisions of the trust are set forth in the person’s will.

With all three types of trusts, the grantor decides the trustee of the trust. With both types of third party special needs trusts, the grantor of the trust gets to decide where the assets remaining in the trust will be distributed upon the death of the disabled beneficiary (money that will not be used to pay back the state). Self-settled special needs trust must include a provision that the state be repaid for benefits paid for the grantor.

See Meredith Murphy, Navigating Special Needs Trusts for Children with Disabilities, SAlawus.com, August 23, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.