Special Needs Trust for a Child
If you have a child who was born with mental or physical disabilities or a child who became disabled later in life and needs someone to manage his or her affairs, you have special and unique estate planning needs. Planning for your child’s financial future is important, and parents want to make sure that their special needs child will be well taken care of when they are gone. A Special Needs Trust (SNT) is one option to consider for your special needs child to help guarantee that his or her health and welfare needs are taken care of after you die. However, there are both advantages and disadvantages to the creation of this type of trust. Listed below are some pros and cons of a Special Needs Trust.
SNTs are typically essential for any special needs person that is unable to independently handle and manage their finances. Some of the advantages of a SNT include the following:
- Your child will still be eligible for government programs like SSI and Medicaid, and the SNT will help fund services and care over what the government will provide.
- All funds are used for the care of the child with the disability. (Your child will not be influenced or taken advantage of by an unscrupulous person looking for financial gain.)
- The funds are tax-deductible.
- The funds are never available for any creditors to pay a judgment, they can only be used for the care of your child.
As with anything, there are also some disadvantages or challenges to creating a SNT for your child, which include the following:
- The cost is high. An SNT has an annual fee, as well as a fee to establish, which can make it financially unaffordable to create for some people. There are minimum amounts required to establish an SNT.
- Your child will lack independence. Your child will have to request funds from a trustee who has complete discretionary control over whether to release the funds or not based on the terms listed in the trust. Some children can feel frustrated due to the lack of independence.
- Some funds must be used to pay back Medicaid in the exact amount that Medicaid paid on the person’s behalf. This can completely wipe out the trust after the child’s death, or when the trust is terminated legally.
You will also need to make a decision regarding who the trustee will be of your SNT for your child. Oftentimes, a trustee is a professional, but the family will also choose a family member to serve as a co-trustee to ensure that their wishes are being followed. The trustee should have the best interest of your child in mind. You also have the option to pay for an audit and have a monitoring service on your trustee after you pass away.
Contact an Estate Planning Attorney
There are many different types of trusts and estate planning tools to choose from. An experienced attorney can ensure that you pick the right vehicle to take care of your special needs child when you are gone, ensure that the trust language is created accurately, and make sure that the trust is broad enough to meet the ever-changing needs of your child as they grow. Contact the Law Office of Kris Mukherji at (858) 442-5747. We can help you determine if a Special Needs Trust is the right kind of trust for your family.