Trusts are not just for the super wealthy. Did you know that a disabled child can only have $2,000 in order to qualify for certain government benefits? What happens if they were to inherit money or are otherwise given more than $2,000?
The sad thing is, in most cases, the child would lose their government benefits. The governmental agency would assume your child has the financial resources to pay for his or her own care and treatment. In order to avoid this, many families will quickly spend down the money to ensure compliance with the $2,000 threshold, but what happens if they are thousands of dollars over resourced? Spending it down can be difficult. Plus, spend down prevents the child from having that money for future needs.
In order to avoid wasting your child’s inheritance or gift on unnecessary spend downs, a Supplemental or Special Needs Trust can be established. By establishing a trust, those funds will be protected for their future use and provide your child additional assets to thrive into adulthood.
There are several types of trusts that can be considered for a disabled child. The three main types of trusts are: Third-Party Funded Trusts, Self-Settled Disability Trusts, and Pooled Trusts. The type of trust that would best fit your family is a very personal decision and it is best to consult an estate planning or special needs planning attorney in making that decision. If you or a loved one are planning to leave an inheritance to your special needs child, a trust will become you most valued estate planning tool.