The Special Needs Trust
The special needs trust can be your primary savings tool for your child’s future. It allows you to properly transfer savings to your child without jeopardizing his or her ability to receive government benefits. Several ways to fund the trust are presented below.
Also referred to as a “supplemental care trust” the special needs trust provides a way for you to supplement government benefits such as Medicaid and Supplemental Security Income (SSI). The trust can be set up so it functions while you’re alive, or begins to function after your death.
Here’s the way it works. First you select a trustee—someone you completely trust and who can properly manage money. If the trust is to function while you are alive, the trustee distributes money from the trust to your child in ways that don’t disqualify your child from government benefits. If the trust is to function after your death, the trustee facilitates the transfer of money from your estate into the trust, then helps manage and distribute the money according to your wishes.
The most important benefits of the trust are maintaining your child’s financial well-being and his or her long-term eligibility for government assistance. It has another benefit, though. Through this trust, friends and family can make gifts of money, also contributing to the financial well-being of your child.
“I feel better knowing that my family will have enough money to take care of themselves in case something should happen to me. Saving for my retirement and for my family’s future is just as important to me as budgeting for the mortgage, groceries, and medication. I contribute to an employee retirement plan and have an annuity for my own security. For my family, I have a term life insurance policy and a pre-paid college fund for both my children. Also, I take every opportunity I get to teach my daughter about spending within her means. I plan to continue that with my son as soon as he gets old enough to spend a dime.”
—Father of a child with special needs