Planning for the future of your child is an important part of an estate plan, but when a child has special needs, you need to consider a few more things. A special needs trust, also known as a supplemental needs trust, is a legal document similar to other estate planning tools that is designed to meet the needs of a disabled individual. It is generally used by parents and grandparents to set up a special trust for their child to ensure their special needs are met in the future.
A beneficiary of a special needs trust is able to qualify for government benefit programs, while still having funds at their disposal from the trust to cope with their supplemental needs, such as:
- Entertainment
- Luxuries
- Medical expenses
- Personal items
- Recreational materials
- Rehab costs and in-home healthcare
- Rent and mortgage payments
- Travel and transportation
- Vacations and outings
- Vehicles and expenses associated with making them accessible
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However, like any other estate planning tool, there are several pros and cons of opting for a special needs trust. It is best to have complete knowledge about special needs trusts to ensure you are making a well-grounded decision for your disabled loved one.
Pros of a Special Needs Trust
- One of the foremost benefits for establishing a special needs trust is that you are able to leave behind monetary support for your disabled loved one, without affecting their eligibility for government benefits. SSI and Medicaid provide medical insurance that cover pre-existing medical issues.
- You have peace of mind that funds will be safe from creditors, and will not be used for paying of any paying judgments.
- Funds are only used to provide care and meet the special needs of your loved one
- Funds in a special needs trust are tax-deductible.
- A special needs trust ensures that your disabled loved one will have financial support in the future for their continued care and treatment.
Cons of a Special Needs Trust
- A special needs trust is very costly to set up and high annual fees can make it difficult for the grantor to create and manage it. Moreover, you need to have a certain minimum amount to establish a special needs trust, making it an option not easily available to everyone.
- The federal government requires the individual to pay back Medicaid insurance money in equal amounts to Medicaid provided to meet the special needs of the disabled person’s medical expenses. This often causes the trust to completely run out of funds.
- The trustee has complete authority over issuing funds based on the terms and conditions of the trust. The beneficiary lacks independence and discretion of using funds of a special needs trust, which can lead to certain issues in the long run.
To make sure that you have covered all the legal grounds for establishing a special needs fund, it is best that you work with an experienced and reliable special needs trust attorney. They will guide you through the process and prepare the right legal documents with terms that effectively meets your needs and wants.
Contact Mary Ann Covone, P.C., Attorney at Law at 708-246-4911 or online today to schedule a free consultation and discuss your estate planning needs.