Special Needs Trust: A Guide For The Special Needs Mom
As a Mom of a child with special needs, most days I feel like I’m barely keeping my head above water, falling into bed exhausted at night, and then getting up and repeating the process. I tell myself I’ll learn about things like special needs trusts, ABLE accounts, guardianship, and other presumably important things “someday”.
Then I blink and my baby with Down Syndrome is a teenager and heavens to Betsy I can’t keep saying “someday”.
Sound familiar?
Well Mama Bear, I’m here for you!
I finally sat down and learned about a few of the things I was telling myself I would learn about “someday”.
Setting Up An ABLE Account For Your Child With Special Needs
if you’re interested in learning about ABLE accounts and keep reading to learn about special needs trusts!
What Is A Special Needs Trust?
A special needs trust is a trust that holds funds or property for your loved one with special needs. The funds in the trust must be used to the benefit of the beneficiary.
Here’s the really important part…it doesn’t impact their eligibility to qualify for needs based government programs such as SSI or medicaid. That’s HUGE for many of us who rely on these programs for our children.
It’s important to note for this blog post I am talking about a third-party special needs trust. A third-party special needs trust is usually set up by family for a loved one with a disability to help care for the loved one once family caregivers, such as parents, pass away.
What Are The Benefits Of A Special Needs Trust?
Special Needs Trust Benefit #1: It protects the assets of a loved one with a disability while maintaining eligibility for needs based programs
I think the biggest benefit of a special needs trust is it protects the assets of a loved one with a disability while maintaining their eligibility for needs based government programs.
The stark reality is most of our children with disabilities are going to have a hard time finding employment that offers them things like quality health insurance, a 401(k), etc. and so it’s REALLY important they qualify for programs such as medicaid.
If Aunt Sally wants to leave your child $60,000 which is awesome and generous, that $60,000 will jeopardize your loved one’s eligibility for needs based programs that they likely rely on such as medicaid, SSI, etc. If your child loses these programs it’s also very likely that the $60,000 Aunt Sally left will be spent very quickly and may not be enough to address your child’s healthcare and day to day living needs for any significant period of time.
Now, if Aunt Sally leaves that $60,000 to your child’s special needs trust your child will still qualify for vital programs like medicaid and that money can be used to enhance their lives such as paying for a gym membership or experiences such as travel.
Special Needs Trust Benefit #2: It protects your child from predators
In general, most of our loved ones with special needs could easily be taken advantage of by people who do not have their best wishes at heart. Max is loving and generous and would hand over all of his money if a “friend” asked him to.
A special needs trust protects our loved ones from nefarious predators because they do not own what is in the trust and cannot direct how those funds are spent. The trustee, who is presumably a good person who does have the beneficiaries best interests at heart, controls the funds and decides on how it will be spent on the beneficiary.
Special Needs Trust Benefit #3: It provides a guideline for how your loved one should be supported
As a trustee you get to decide how the money in the trust will be spent on your loved one. Once you pass, you will name a trustee to take over and you can provide guidelines on how the funds should be spent.
Special Needs Trust Benefit #4: You can name the right people to manage funds for your loved one and advocate for them
Obviously, deciding who will take over as trustee for your child’s special needs trust is a big decision. It should be someone you can trust, someone willing to advocate for your loved one, and someone who understands and is willing to follow your wishes.
What Are The Disadvantages Of A Special Needs Trust?
Special Needs Trust Disadvantage #1: Cost
Special needs trusts do cost money to set up and then there are annual fees. You can work with a lawyer to set things up so that upon your death a third party special needs trust will be created for your child with special needs and funded with things such as your life insurance policy.
Special Needs Trust Disadvantage #2: The beneficiary lacks control of the funds
This can be a positive or a negative depending on how you look at it. The trustee controls the trust so you really have to trust the trustee.
Special Needs Trust Disadvantage #3: Use of funds is highly regulated
A special needs trust is not intended to be used for basic needs. If a trustee isn’t familiar with the rules of how the funds in the trust can be spent the beneficiary’s needs based program assistance may be impacted. Meaning, their monthly SSI payments may be decreased.
Who Is Eligible For A Special Needs Trust?
People who qualify for a special needs trust are those of any age who have disabilities that are permanent or severely disabling that qualify them for needs based programs such as medicaid and SSI. Common qualifications are diagnoses such as Down Syndrome and cerebral palsy.
How Does A Special Needs Trust Work?
Once a trust is set up the grantor (person who sets up the trust and puts funds in it) appoints a trustee. Typically in our scenario, we set up the trust for our child with special needs and put funds in it so we are the grantor. We get to appoint the trustee, in most cases it would be us as the parent(s) and we appoint a successor trustee, someone who will take over the trust once we pass. We name our child with special needs as the beneficiary of the trust and the funds in the trust must be used for their benefit. The beneficiary cannot direct how the funds are used and the beneficiary can’t revoke or terminate the trust.
What Can Be Placed In A Trust?
Money, real estate, stocks, collections such as art, businesses, patents, and jewelry can all be placed in a special needs trust. Typically, things like jewelry or art would be sold for cash which would be used to pay for things to support the beneficiary.
What Can The Trust Pay For?
A trust can pay for a lot of things, however, it’s not intended for basic needs such as shelter and food because these things are supposed to be covered by government needs-based programs. A trustee can choose to use the trust to pay for things like shelter, but it may result in a reduction of SSI benefits. A trust can be used to pay for medical services not covered by medical insurance such as medicaid.
When Is A Special Needs Trust Terminated?
A special needs trust is terminated when the beneficiary dies. If this occurs the remaining funds go to the remainder beneficiary. A third party special needs trust is not required to pay back medicaid with any remaining funds after the death of the beneficiary.
A special needs trust is also terminated when funds are depleted, the beneficiary no longer needs government benefits, or the beneficiary is no longer eligible for government benefits.
So there you have it Mama Bears!
An introduction into special needs trusts. Are you a teeny bit overwhelmed right now? Perhaps you’re going down the rabbit hole of what will happen to your child with special needs after you’re gone?
I get it. It’s terrifying to think about. It’s one of the things that keeps me up at night.
I mean, parents never want to outlive their children, but as parents of children with special needs, because of our circumstances, some of us see that scenario as not that bad.
I’m constantly thinking if I can live until I’m 95 then Max will be 68 and that’s a long life for someone with Down Syndrome. How much longer would he live I wonder? How much would I have to put away for him?
Yes, these are morbid thoughts. These are NOT things I want to think about, but as a Mama Bear I do think about them because I must.
The reality of the situation is I am going to die and I’m likely going to die before my son with special needs.
As his Mama Bear it’s my job to do what is best for him and that means thinking about uncomfortable things such as my death and life for him after that event.
So, I learn about things like ABLE accounts and special needs trusts and estate planning. I come up with a plan and I do my best to make sure that in the event of my death he will be taken care of because that’s what Mama Bears do.
Mama Bear, if you found this blog post helpful then you may want to check out…
Setting Up An ABLE Account For Your Child With Special Needs
Creating A Life Map For Your Child With Special Needs
5 Reasons You Need To Create A Vision Statement For Your Child With Special Needs
Dandelion Tribe Takeaway: A third party special needs trust is a trust usually created by family for a loved one with special needs that holds funds for your loved one but doesn’t impact their eligibility for needs based government programs such as medicaid and SSI.
Mama Bear Share: Do you have a special needs trust for your child with special needs?
