Adding a new member to the family is a complication even in the best circumstances. When a child has a disabling medical condition, the entire family will likely need to make adjustments to their lifestyles to support the family member with special needs.
Parents of children with special needs will worry about what will happen to their kids when they die or develop health issues caused by age. For many families, establishing a special needs trust will be an important part of planning for the future of a loved one with special needs.
What is a special needs trust?
A special needs trust is a legal entity that you create to hold and manage assets on behalf of someone with a disabling medical condition. The trustee managing those assets will have control over their distribution, which protects your loved one from making mistakes with resource management.
The trust is also the legal owner of those assets, while the family member with special needs is simply the beneficiary. That distinction is crucial if your family relies on government benefits.
Special needs trusts help people get or keep Medicaid
The assets that someone owns and their income can prevent them from qualifying for Medicaid benefits even when they don’t have insurance. People can also lose Medicaid coverage because of a windfall.
The resources you would like to leave for your child with special needs might be valuable enough to prevent them from qualifying for Medicaid for years. When those assets are in a special needs trust, your child can still potentially qualify for Medicaid benefits. They may also qualify for other, secondary benefits with income limitations, like housing benefits.
Being able to count on Medicaid and other need-based benefits will give your vulnerable loved ones security even after your death. Your decision to create a special needs trust protects your loved one from the misuse of their inheritance or the assets you would like to use to support them. It also protects them from a situation where they don’t have enough assets to live independently but they still cannot qualify for government aid.
Being realistic about the future needs of a child with special needs can help you determine if creating a trust is the right solution for your family.
