Imagine you have a child that, for whatever reason, you are concerned does not have the capability to care for themselves when they grow up. It could be that your child is autistic or has muscular dystrophy or any other condition. Whatever the reason, they just will not be able to care for themselves when they are adults. In most cases, we, as parents, are not able to be there for our kids for their entire lives. It is the sad reality that we, those of us that have kids with disabilities, must live with.
That is where a special needs trust comes in to play. Obviously, a trust cannot make you live longer so that you can be there. It cannot magically make it so your child can care for themself. What it can do is provide a financial structure your child’s life so that they can be taken care of. They will be taken care of financially. They will be taken care of physically. And if structured well, it can help them to get services that they may need from social services.
You may be asking yourself, “how in the world can this work? I feel all alone in taking care of my kids now, how can anyone possibly take care of my kids after I am gone?” If you remember back to our last few posts, you will recall what a trust is. If not, we suggest you read this blog about how a trust is structured as it will help to understand this specific type of trust. Essentially, a special needs trust is an empty box that has your child’s name on it. Everything that goes into that trust is there to benefit your child.
For example, say that when you die, you have a life insurance policy. Of course, you want your child to have that money. On the other hand, you do not want your child to oversee that money because it could lead to a litany of bad outcomes. You may be opening your child up to have to pay more for medical treatments rather than the state pay for it in which all that insurance money will be paid to a hospital or health care facility. You may be disqualifying your child from receiving the services that they need because now they “have too much money”. You may be opening your child up to predators that are going to try to fraudulently take that money from your child.
Any of those reasons are scary enough to make you want to plan. Rather than giving your child that money outright, the government has given you the ability to create that box, a special needs trust, to store all that money that you have given them. This holds true for any asset that they may accumulate from you, grandma and grandpa, your rich uncle, or any other means. When you create this box, you also designate someone to be the person who controls the box. They are called the trustee and is usually someone that is close to you and is very trustworthy. The trustee can determine how much money comes out, when it comes out and why it comes out. They can be required to give an accounting each year so you can guarantee that even the trustee must answer as to where the money is going.
Additionally, you can determine who is the guardian of your child. They would be the person that oversees the actual care of your child. By splitting up the duties, you can make sure that each of these people are accountable. Again, it is not that you do not trust the people you put in charge, but it is a checks-and-balance to make sure that your child is well taken care of.
While planning for this may seem like a bit of a stressful exercise, it is well worth it. Again, you can make sure your child is taken care of physically, not going to financially devastated by someone fraudulently stealing from your child, and make sure they receive the services that they need to be a productive
adult. It does take some advanced planning, but it is worth it to make sure your child has every opportunity even after you are gone.