Having a child with special needs presents you with a host of challenges. One thing that you probably think about a lot is what is going to happen to your child when you pass away. It is imperative that you take steps now to protect your child when the inevitable occurs. There is a fine balance that you have to meet regarding taking care of your child and ensuring that you don't take away inadvertently the benefits he or she counts on.
#1: Needs-based benefits can be affected by an inheritance
You must be careful about how you leave assets to your child if he or she relies on needs-based programs like Supplemental Security Income or Medicaid for vital necessities. Assets left to a special needs child or adult through a will can count against the asset limits for needs-based programs. A disqualification from these programs would come at a time when your child is already facing the difficulty of losing a parent. You won't be there to try to fight to get your child back on the programs that help him or her to live.
#2: Special needs trusts provide protection for your child and the assets
A special needs trust is a legal option that enables you to care for your child. Assets held in a special needs trust don't count toward asset limits for needs-based programs. Your child doesn't have full and free access to the assets in the trust. Instead, a trustee controls access to the assets. This puts the trustee in control of how to use the assets. In addition to keeping the assets controlled, a special needs trusts protect them from creditors if they happen to try to make a claim against your child.
#3: Considerations of special needs trusts
Special needs trusts are part of a comprehensive estate plan. You must ensure that trust documents include necessary wording. For example, the trust must specifically note that it is for supplemental use and not for basic support. On top of making sure these provisions are present, you have to ensure you choose the appropriate special needs trust.
You can choose from a pooled trust or an individual trust, depending on your circumstances and the needs of your child. Explore each type of trust before you make a final decision about which you will set up for your child.