Parents and grandparents of a child with a lifelong disability, such as autism, have a special estate planning challenge. On the one hand, they want to provide the financial support that the child never may be able to provide for himself or herself. On the other hand, they want to protect the child’s eligibility for the full range of government support programs, including health care.
Distributing assets outright to a special needs person is likely to result in a disqualification for government benefits. Completely disinheriting the child is not a good idea, because government benefits alone may not be enough. Giving property to other family members with the “understanding” that it will be used for the benefit of the special needs person may work for some families, but there are risks. For example, such assets will be vulnerable to creditors, including potential ex-spouses should there be a divorce.
What is a Special Needs Trust?
The better course, for many families, is to establish a “third-party” special needs trust. A “first-party” special needs trust is one established for oneself, with one’s own assets. The assets of first-party trusts must be used to repay state Medicaid agencies that have paid for medical services. No such requirement applies to third-party trusts that are created for others.
This is a complicated area of law, and the rules vary from state to state, so the advice of a lawyer well-versed in special needs trusts will be essential.
When special needs trusts are administered by a corporate trustee, such as us, the assets receive professional management and the beneficiary receives continuous financial protection.