As we have written about before, trusts are a critical piece to any estate plan. There are many different kinds of trusts that can be utilized, depending on the situation. One important scenario for many families all across the country is helping their special needs child when their estate is passed on to them. This is where a special needs trusts can come into play, and it has many benefits for the parties involved.
If the special needs child will require medical help and aid into his or her adult life (or possibly even for the rest of their life), then a special needs trust can financial support those accommodations. These trusts are called supplemental-needs trusts.
One of the crucial reasons that these trusts are so important is because inheritance can actually disqualify a special needs individual from receiving the support they need. For example, if a special needs individual is on Medicaid or some other form of government benefits, then receiving a large inheritance all at once could actually disqualify them for the benefits due to the individual’s “income.”
A special needs trust or supplemental-needs trust would be managed by a trustee, meaning that the inheritance would be applied over time — and in accordance with the needs of the child. As such, they can still receive their government benefits without ruining their qualifications for the benefits.
In addition, a life insurance policy can also help you address your estate and the needs of your children.
Source: Wall Street Journal, “Estate Planning When You Have a Special-Needs Child,” Henry E. Klosowski, March 27, 2016