As a parent of a child with disabilities, you understand the financial challenges that accompany a special needs life.
Government aid programs like Medicaid, Medi-Cal, and Social Security can reduce medical bills but are only available to those who qualify. If your estate plan includes a significant bequest to your special needs child, you may actually disadvantage your child by causing them to lose eligibility for government aid. For many families facing this problem, a Special Needs Trust is the solution.
What Is a Special Needs Trust?
A Special Needs Trust ("SNT") is a legal loophole that allows your child beneficiary to receive assets from your estate without affecting their eligibility for government programs.
The trust can hold real property, cash, personal property, or any other gift with value.
How Does an SNT Work?
In short, an SNT does not affect your child's eligibility because legal ownership of the assets remain with a trustee instead of with your child. Because your child has not inherited property outright, the assets left in trust to your child will not be calculated by the government when determining their eligibility for aid.
The trustee is bound by the instructions you give them. Ordinarily, the creators of the trust (referred to as "settlors" in legalese) instruct the trustee to use the assets held in trust to pay for disability-related expenses that may not be covered by those government programs.
For example, the settlor can permit a trustee to use the assets held in trust to pay for a disability-accessible home, or vacation with accommodations for your child's special needs.
How Can I Set Up an SNT For My child?
A SNT is created by the execution of a trust document. The trust document will identify the property from your estate to be left to the trust, contain instructions for the trustee, and other provisions to insure your child benefits from your estate but does not lose eligibility for those valuable government programs.