As a parent of a child who has a disability, you probably know exactly what your son or daughter needs to thrive. You likely also understand his or her limitations. If these limitations likely include a future inability to work, you may want to use your estate plan to leave financial resources to your child.
Making a cash gift to your son or daughter may seem like the caring thing to do. Still, your gift may make it virtually impossible for your child to obtain public benefits when he or she becomes an adult. That is because many public programs consider income and assets, your gift may render your child ineligible.
A special type of trust
With a trust, you place your assets into a fund instead of giving them to a specific person. If you establish a special needs trust, your child may use disbursements from the trust to pay for certain expenses. Because the trust holds your assets, funds from the trust do not count as income when your child applies for needs-based government help.
A better quality of life
Public programs like Supplemental Security Income and Medicaid can cover basic medical care and ordinary living expenses. Therefore, to remain eligible for government assistance, your child cannot use funds from the special needs trust on these items. Because public benefits are often meager at best, your child’s quality of life may be low.
A special needs trust addresses this issue. Specifically, your child may use disbursements from the trust on expenses that instantly improve his or her quality of life. These include hobbies, travel, out-of-pocket medical care, home improvements, necessities and other similar items.
Ultimately, when you set up a special needs trust, you give your child resources that go hand-in-hand with vital government financial assistance.