When you have a child with a life-long disability, it's only natural to worry about their future once you're no longer here to take care of them. It's important to put long-term financial plans for someone who has a disability in place as early as possible.
A supplemental needs trust (also called a special needs trust) may be the perfect answer. Here's more information on why you should consider this as an option for your disabled loved one.
What is a supplemental needs trust?
Essentially, it's a legal entity that can be used to hold and manage money and other assets that are collected for the benefit of the disabled individual. Family members, like parents and grandparents, can contribute to the trust through gifts throughout their lifetime. The trust can also be used to hold the funds from a large legal settlement (in cases where the disability was caused due to a negligent accident or medical malpractice). Finally, the trust can also be used as part of an estate plan to capture the benefits of an insurance payout, pensions, and other items that are bequeathed to the person with special needs.
What are the benefits of a supplemental needs trust?
The primary benefit of this kind of trust is that it can provide for the beneficiary's comfort and needs without endangering either their entitlement to benefits from Supplemental Security Income or Medicaid -- both of which they may rely on in order to live.
They also have the advantage of being secure. Since a trustee is put in place to manage the assets in the trust and oversee any distributions, you can rest assured that your disabled child won't be the target of grifters or freeloaders who might otherwise prey on them for money. Similarly, keeping the assets in a trust will also protect those assets against creditors. Should your child marry someday, the assets would also remain separate from any marital property and be safe if there's an eventual divorce.
How can the assets in the trust be used?
Generally, the beneficiary cannot receive cash from the trust directly without endangering his or her government benefits. However, the trustee can use the money in the trust to make sure that your child has amenities he or she might not otherwise be able to afford.
For example, the funds in the trust could be used to provide your child with nice furniture, good clothing, a gym membership, therapy, art classes, hobby supplies, and vacations -- all of which will enhance your child's quality of life in the future.
For more information, talk to an attorney with experience handling supplemental needs trusts today.