If you are the parent of a child with Down syndrome, autism or another type of disability, you face unique estate planning considerations and needs that differ from those faced by other parents. The lifetime expenses associated with raising a special needs child can prove considerable, and chances are, you want to ensure that your child has everything he or she needs to maintain the quality of life to which he or she is accustomed.
If you simply leave assets to your disabled child in a will, however, the amount of money you leave him or her may make your child ineligible for public benefits, such as Medicaid and Supplemental Security Income. Why? To qualify for benefits, your child must pass a “means test” that assesses his or her level of need, and having too much money can disqualify your child from receiving these much-needed benefits.
How a special needs trust helps
A special needs trust, or a supplemental needs trust, is established on behalf of your child using assets that do not currently belong to your son or daughter. It might include property, life insurance policies and so on, but leaving your child assets in this type of trust is different from leaving him or her assets in a will. Because the assets in the trust are not the beneficiary’s, they can be used for alternative purposes, such as charitable ones, should your disabled child pass on.
Because the trust's assets do not belong to the beneficiary, they are not factored in when determining eligibility for public assistance. Thus, this is an effective way to leave assets to your disabled child without hindering his or her ability to receive financial assistance from the government.
Establishing a special needs trust is just one step involved in estate planning for your special needs child, but it an extremely important one if you want to ensure your child can still receive public assistance after your passing.