"People with disabilities are now living long lives," says Chris Cooper, a certified financial planner in Toledo. "They're living into old age and getting old-age problems like Alzheimers and arthritis, so they're dependent much longer." In conjunction with government assistance, a special-needs trust can ensure that your child is set for life.
What is a special-needs trust?
A special-needs trust, also known as a supplemental trust, is a safe place to park assets for your disabled child. First of all, the trust is protected; if you are sued, go through a divorce, or have your will contested, the funds cannot be touched and there will never be an interruption in available money for your child. Second, by giving money to the trust rather than directly to your child, he or she will continue to qualify for government assistance programs. "You can give money in such a way that the state doesn't view it as an asset or a resource," Cooper says.
How does a special-needs trust interact with government programs?
Many children with special needsa category that comprises a wide array of medical, behavioral, developmental, learning, and mental-health conditionsqualify for government assistance programs such as Medicaid, which covers most medical services and housing, and Supplemental Security Income, which provides a monthly stipend for basic living needs. These programs are administered on the state level; though eligibility requirements vary, in most states your child cannot have more than $2,000 in assets. If you or a relative bequeaths more than that to your child, it should be placed in a special-needs trust; otherwise he or she can be disqualified from government programs.