Welcome to CuriousParents.com

special child

Financial Security for Special Needs Children

By Daniel Roccato

Parents of special needs children know both the joy and challenge of caring for them. If you are one of these parents, chances are pretty good that you have special “financial” needs. A “special needs trust” may be part of the solution.

What is a special needs trust?

In a nut shell, a special needs trust (or supplemental needs trust) allows parents to save money that can be used to meet the needs of a disabled child, now and in the future, without necessarily jeopardizing eligibility for government benefit programs. 

Why establish a special needs trust?

Government benefits are generally available to qualifying children with special needs. If your child qualifies for government benefits, one of your goals may be to ensure that her eligibility continues into the future. A special needs trust can help you achieve this goal and at the same time provide for supplemental care and services for your loved one.

To Preserve Medicaid Eligibility. Medicaid provides medical assistance to disabled individuals who demonstrate financial need. Children and adults can qualify for Medicaid only if their monthly income and the value of their assets fall below certain limits (typically around $2,000). In determining eligibility, a state may count only the income and assets that are legally available to the applicant. A special needs trust restricts the trust beneficiary’s (your child) direct access to the assets in the trust. Thus, the assets are not considered legally available to the beneficiary. As a result, a special needs trust may protect Medicaid eligibility because the assets in the trust are not counted.

To Preserve Suppplemental Security Income Eligibility. Chil-dren with special needs who have limited resources often receive monthly benefits from Supplemental Security Income (SSI). These benefits can be used for basic needs such as food and housing. But because SSI benefits are strictly “need-based,” inheriting money can mean that a special-needs child will lose his or her eligibility for this program. By naming a special needs trust, instead of your child as beneficiary, you may preserve your child’s eligibility while having the assets inherited by the trust used to care for the child.

To Provide Additional Services and Care. A special needs trust can be particularly useful if you want to provide services and care for your child, without supplanting Medicaid benefits. While Medicaid pays for many medical costs, it will not subsidize items and services considered nonessential. Nonessential services may include health-related expenses such as eyeglasses, dental care, rehabilitation services, and home aide services, as well as, personal expenses such as transportation, family visitations and vacations.

Third-Party Special Needs Trust

There are many types of special needs trusts. A third-party special needs trust is a good choice for many families. A third-party special-needs trust is established with funds that belong to someone other than the special-needs child. For instance, a parent or grandparent may create a trust and fund it immediately or over time. The trust could also be funded with insurance proceeds or other assets from a persons estate. Upon the death of the special-needs child, any assets that remain in the trust can be distributed to whomever has been designated in the trust. If the trust is properly drafted, it is possible that the government will not have to be paid back for the long-term care services provided when the special-needs child dies.  

Selecting a Trustee

The selection of a trustee for a special needs trust is an important task because the trustee administers the trust and manages its assets. The trustee’s job is to follow the terms of the trust document and fulfill its objectives. You can name yourself, a family member, an attorney, or a bank. Another option is to name a family member and a professional trustee that share responsibilities as co-trustees.

A word of caution: Special needs trusts are great tools and can provide families real peace of mind, but they are complicated. We spend a lot of time listening to our client’s objectives and concerns before we even begin drafting documents. So be sure to consult a qualified attorney to see whether a special needs trust makes sense for you family.

Daniel Roccato, MBA, CPM, is President of Quaker Wealth Management in Moorestown, N.J., providing integrated investment, legal and financial planning services to families. quakerwm.com.