Ensuring the financial future of a child with special needs is an important task. An effectively designed plan can provide the support and maintenance needed to help your child live a full and happy life.
Many children who have a special need or disability will at some point qualify for and receive public assistance — such as SSI (Supplemental Security Income) or Medicaid.
To qualify for public assistance, an individual must have assets below an amount established by the government. Benefits received through public assistance can be extremely helpful, but they are rarely enough to maintain an ideal quality of life.
More often than not, parents and even other family members assist in providing financial support for children with special needs.
However, parents and others must be careful in providing such additional financial support, so as to not disqualify the individual from receiving public assistance. Outright gifts or savings accounts will be counted as assets or income for the individual with special needs, which can lead to a cut-off of government benefits.
Supplemental Needs Trust
Parents of children with special needs can plan to provide for their children, however, without disrupting the children’s benefits. One option that exists in Minnesota is setting up a Supplemental Needs Trust (SNT), sometimes referred to as a Special Needs Trust.
SNTs allow for additional financial support to individuals without affecting their eligibility for public assistance benefits. And they can be set up by anyone who wishes to provide support to someone with a disability — whether it be a family member or friend. These trusts exist to supplement the government benefits the person with the special need or disability might be receiving.
While government benefits are used for primary/core/basic needs, the SNT can be utilized for additional needs above and beyond what government assistance is providing to give a higher standard of living to the beneficiary other special benefits.
SNTs can hold a variety of assets — including bank accounts, stocks, bonds and real estate — for the lifetime of the child with special needs.
Any remaining assets in the trust at the time of the special needs child’s death can be distributed to other living children or a nonprofit organization, for example.
Inheritances may be left to a SNT as well without disrupting the public assistance a child may be receiving. Further, parents can name a trustee who will administer the trust and oversee the financial wellbeing of the child with special needs.
One family’s approach
I recently worked with a couple in writing a will that established a SNT for their 4-year-old son who has autism. In their estate plan, the parents also named a person to serve as their son’s guardian, an individual who understood his unique needs.
The SNT provides a place for his parents and others, including his grandparents, who would like to leave money for his long-term care — without fear of it disrupting government benefits.
Any money left in the trust for their special needs son at the time of his death will be left to their other son who doesn’t have special needs. They now have peace of mind knowing a plan is in place to provide security for their son should something happen to them.
Supplemental Needs Trusts can be relatively complex to set up, and there are also a number of guidelines that must be followed when administering distributions from the trust.
Depending on your unique situation and estate, there may be additional or alternative planning that would best meet your goals and circumstances.
Meeting with an attorney experienced in this area of law is a great starting point for planning for the security of your children with special needs.
Rachel Schromen of Schromen Law in St. Paul specializes in estate planning and elder law. She was voted Favorite Woman Estate Planning Attorney by Women’s Press in 2018. Learn more at schromenlaw.com.