Securing the Future Needs of Special Needs Children
Is your current estate plan structured in a way that protects your child's financial future and government benefit eligibility?
Examples of Special Needs Trusts
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Example 1: Middle-Income Family
Here's an example of a middle-income family using a special needs trust (SNT) to provide for their child with special needs:
John and Jane are a married couple with a 15-year-old child, Sarah, who has autism. They have a combined annual income of $85,000 and own their home. Sarah receives Supplemental Security Income (SSI) and Medicaid benefits to help cover her living expenses and medical care.
John and Jane want to ensure that Sarah is financially secure after their passing, but they also want to make sure she can continue receiving her government benefits. To achieve this, they consult an estate planning attorney who specializes in special needs planning.
The attorney helps John and Jane establish a third-party special needs trust, funded with a portion of their savings, as well as a life insurance policy naming the trust as the beneficiary. The trust is set up with clear instructions regarding how the funds should be used for Sarah's benefit, including educational expenses, therapies, recreational activities, transportation, and other supplemental needs not covered by her government benefits.
John's sister, Mary, agrees to serve as the trustee of the SNT. As trustee, Mary will be responsible for managing the trust's assets and making distributions for Sarah's benefit, in accordance with the trust's terms.
When John and Jane pass away, the life insurance proceeds and other assets designated for the SNT will be transferred to the trust. The assets in the SNT will not be considered Sarah's personal resources for the purposes of SSI and Medicaid eligibility, allowing her to continue receiving those benefits.
Mary, as the trustee, will make decisions on how to use the trust's funds to provide for Sarah's supplemental needs, ensuring that Sarah's quality of life is maintained without jeopardizing her government benefits.
In this example, the middle-income family uses a special needs trust to secure their child's financial future and maintain her access to critical government benefits. The SNT allows them to provide for Sarah's needs in a way that is tailored to her specific situation, while preserving her eligibility for SSI and Medicaid.