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3 reasons to create and fund a special needs trust

On Behalf of | Aug 31, 2023 | Estate Planning |

Those who have a loved one with special needs must often focus a lot of their energy and resources on that individual’s care. Rather than taking care of a child until they turn 18, parents and other family members may need to embrace lifelong responsibilities for those who have significant medical challenges.

A special needs trust is one of the ways that family members can provide for someone with special needs throughout their life and even after the caregiver dies. Although putting together and funding a special needs trust can be a challenging process, many parents or caregivers find it to be a worthwhile endeavor. These are three of the most common reasons that families cite for establishing a special needs trust for a vulnerable loved one.

To protect eligibility for state aid

Family members can theoretically continue providing direct financial support to an adult child with special needs for the rest of their life. However, if they hope to live semi-independently or require significant medical support, state benefits may be necessary to preserve their quality of life. To continue receiving Medicaid, for example, an individual will need to meet certain strict limits regarding their accountable assets and their monthly income. The structure of a special needs trust can limit what someone owns directly and therefore allow them to more easily maintain the benefits that help guarantee their standard of living.

To reduce the risk of financial abuse

Those with special needs can seem like ideal targets for individuals with unscrupulous intentions. People may lie to, manipulate or threaten an individual with special needs to gain access to or control over their assets. Having someone’s most valuable resources owned by a trust will eliminate some of the motive for financial abuse and reduce its likely impact on someone’s quality of life.

To provide ongoing outside support

Parents and other caregivers taking care of someone with special needs often worry about what will happen when they decline due to age or die. A special needs trust has a trustee who must manage the resources and distribute them in accordance with the trust documents. That individual can be a crucial form of practical and social support for a vulnerable adult with special needs. They can help oversee someone’s finances and play an active role in managing their life.

The exact benefits that a family derives from a special needs trust will depend on the assets used to fund the trust and the circumstances of the beneficiary of the trust. Exploring the beneficial impact of a special needs trust may help people better evaluate whether creating one might be the right choice for their family’s situation.