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Why should I create a Special Needs Trust for my disabled child?

While many of us plan to have our inheritable assets divided equally among our children, sometimes parents of a special needs child elect to split the estate differently.  To this end, a share for their disabled child can be placed in a Special Needs Trust to provide supplemental support beyond what public and private agencies may provide.  

disabled childDepending on the severity of the handicap, special needs children, grandchildren, and others require special care and support throughout their lives. With planning, even after you are gone, the life of your disabled child can remain comfortable and even happy.

Without proper preparation, the level of the individual’s support can be disrupted, and their situation can worsen dramatically. 

Ensuring Your Special Needs Dependent Will Receive Proper Care and Support

Parents or loved ones of special needs children naturally worry about what might happen should they themselves die unexpectedly. While worrying is natural, proactive steps to protect your special needs dependent are essential.

In these instances, an experienced elder care lawyer can help to create a financial strategy that makes sure your dependent receives the necessary care and attention, plus many additional benefits that they would not otherwise receive.

What is a Special Needs Trust?

A Special Needs Trust is created to do two things:

  1. Provide funds that pay for the items and services not covered by government need based programs like Medicaid or Supplemental Security Income (SSI). Items eligible to be paid for by the Trust may include quality of life enhancements like:
  • upgraded housing
  • transportation, including a car or van with special modifications
  • education
  • recreational activities
  • some medical or dental expenses
  • home upgrades
  • electronics
  • vacations
  1. Establish a supplemental financial resource that does not jeopardize the individual’s eligibility for government benefits that provide for basic care. The extent of government benefits that the individual may receive is based upon the scope of assets owned directly by the individual.

Who Will Manage the Special Needs Trust?

A designated Trustee maintains the responsibility for managing the Trust, withdrawing funds to purchase goods and services for the individual’s benefit, and ensuring that all expenditures are legal and will not impact government program eligibility. While the funds in the trust are not considered the property of the disabled person at the time, the Trustee may not personally derive benefit from the assets of the Trust.

When you are creating a Special Needs Trust, you should select a willing and reliable family member, trusted outsider, or a professional trustee. The most crucial element is making sure that the person is honest and will manage the trust according to your wishes and the best interests of the special needs heir.

In some instances, two trustees may be chosen. These may be either family and non-family members. There are advantages and disadvantages to naming two trustees.

What Happens if the Trustee Distributes Cash to the Disabled Person?

Cash distributed through the Trust will count as income and potentially reduce the special needs person’s government benefits to which they are entitled. In sufficient amounts, the disbursement could cause the person’s Social Security and Medicaid benefits to disappear.

Are There Tax Ramifications to Establishing a Special Needs Trust?

There may be. You should discuss this with your Elder Law Attorney or tax advisor to determine what tax liabilities or benefits there may be for you or the beneficiary from setting up the Trust.

Contact the New Jersey Law Office of Nicholas A. Giuditta III

Nicholas Giuditta has been practicing Elder Law in New Jersey for over three decades. From his law office in Westfield NJ, Nicholas will help you with all issues regarding your estate planning, including wills, trusts, and estate-related tax issues.  

Contact the Giuditta Law Office for a private consultation regarding matters related to your estate or a Special Needs Trusts.

You may complete the personal information form on the firm’s website, and one of our professionals will contact you for your confidential review.

Alternatively, you may phone for an appointment at 1-908-232-0099.