Legal guardians and parents of a special needs child want to take care of their loved ones after they die. While a special needs trust helps them accomplish that goal, guardians and parents must understand how to make the most of the estate planning tool.
With insights from Mito Action, parents and guardians lay the groundwork for establishing a trust for their disabled child. Being well-informed on all aspects of estate planning helps parties resolve their fears and concerns.
The two special needs trusts
Parents and legal guardians have two trust options for their special needs child: first-party trusts and third-party trusts. With a first-party trust, the disabled person has her or his funds or comes into an inheritance and wants to meet public benefits requirements. For third-party trusts, others fund the trust.
Medicaid and Social Security regulations and policies govern first-party special needs trusts, while third-party trusts have fewer stipulations. Rules regarding first-party trusts involve specific individuals who may establish a trust. Also, parties may only establish and fund a first-party trust until the disabled person turns 65. One advantage of the trust option is that disabled persons still qualify for public benefits.
The importance of special needs trusts
One essential reason to understand and use special needs trusts is that several public benefits programs have asset tests. For instance, Medicaid and Supplemental Security Income have an asset limit of $2,000. If a person has over $2,000 in assets, she or he cannot receive public benefits.
Special needs children and adults deserve to live life with financial peace of mind. The right estate planning tools and information help them and their parents or guardians to do just that.