Some Important Issues to Consider When Creating A Special Needs Trust

Some Important Issues to Consider When Creating A Special Needs Trust

A child with special needs changes the life of a family in many ways. The parents of a child with special needs embark on an unplanned journey knowing little of what the future holds for their child. Planning for an unknown future without any knowledge or experience is a daunting task for the parents of any child with special needs. Many parents utilize a special needs trust as a tool to help their child receives all the benefits necessary to ensure a high quality of life. There are many important issues to consider when creating a special needs trust.

Whether a child with special needs is still a minor or now an adult, parents of children with special needs must exercise an additional degree of care and judgment when formulating their estate plans. This becomes especially relevant when the child begins to receive needs-based public benefits such as Supplemental Security Income (SSI) or Medicaid.

Parents of children with special needs have similar goals when making their estate plans. The primary goal is to utilize their estates to develop and enrich the lives of their special needs children while maintaining the child’s enrollment in public benefits programs essential to such enrichment. A well-prepared special needs trust may help accomplish this primary goal as well as other additional but indispensable objectives.

Like any child, each child with special needs is unique. Planning considerations will vary depending upon the child’s age, competency, and other considerations based on the family’s needs. However, perhaps the most crucial consideration of special needs estate planning is to protect the assets of the parents’ estate that are transferred to their child with special needs at the time of death. Parents must ensure that these assets are not considered available assets as defined by public benefit agencies. Also, too much monthly income or cash on hand may negatively affect their child with special needs’ future eligibility for benefits.

While a special needs trust may provide lifetime money management for the benefit of the child with special needs and protect the child s eligibility for public benefits, it may also ensure that some conglomeration of funds is available for future use if public funding is ever discontinued or becomes restricted.

One of the first considerations is whether the special needs trust will be created at the parents’ death by incorporating a trust known as a testamentary trust within a will. The parents’ other option is to create a special needs trust while they are alive known as a living trust or inter vivos trust. An advantage of a living trust is that it avoids probate, thus saving time and money, as well as ensuring that the child has access to essential assets immediately upon the death of the last parent.

Selecting the trustee of a special needs trust is one of the most important decisions a parent will make in ensuring the trust’s long-term success and the child’s long-term development and stability. It may be wise to appoint another family member who is close to the child, or it may be more beneficial to appoint someone who has experience working with children with special needs and adults.

The above article was initially posted by Brian Rubin, founder of the Rubin Law Firm in Chicago, Illinois and parent of an adult son with developmental disability.  Rubin Law is the only law firm in Illinois exclusively limited to providing special needs legal and future planning to guide Illinois families of children and adults with intellectual disabilities, developmental disabilities, or mental illness down the road to peace of mind. Brian is a fellow member of the Special Needs Alliance.