Aug 30, 2011
Special Needs Trusts
So, what is a Special Needs Trust? Money set aside for your special needs son or daughter.
Why is it important to set one up, or at least investigate it? In the event of your "untimely demise" (that's how our attorney put it...yikes!), this money would be set aside for our child. If that money exceeds the amount allowed in order to qualify for SSI, Medicaid, etc...it doesn't matter. It's still protected and isn't used against your child in obtaining those services. However, without the Special Needs Trust, if money is inherited by your child, that becomes a part of his/her assets and can, and usually, disqualifies him/her from receiving other benefits -- such as the already mentioned SSI, Medicaid...but also food assistance, specialized housing situations, etc. Those benefits that they may already receive may be cut off if that money isn't protected by a special needs trust.
Why is it good to set up a Special Needs Trust early? Good question. Because, I was planning on doing it later...when Samantha was older and when we were actually getting a real income (doesn't that sound pleasant?!). Setting up a Special Needs Trust early is smart for a couple reasons (that I can remember anyway). One: You never know what will happen tomorrow. As much as we like to think we are invincible, if being a special needs parent has taught me one thing, it's that life doesn't turn out like you plan. So, you plan for the unplanned...er...well, you get what I'm saying. Two: The money set aside in a special needs trust doesn't count against YOU or your other children either. For instance, say you have child #2 who wants to apply for financial aid for college. If you have $50,000 sitting in a separate account that you have set aside for child #1's care, that may be considered money that the parents have and can disqualify child #2 from getting assistance. HOWEVER, if you have a Special Needs Trust set up for child #1, even if you have $5,000,000 in it, when child #2 applies for financial aid, he'll still qualify (well, possibly if the other criterion fit). Say YOU are going through a rough financial spell. No work. No money coming in. You receive food assistance for a period of time. The money in the Special Needs Trust is NOT counted as personal assets. That money is protected. You still have to declare you have it (gov't needs to know all that stuff), but it's not looked at as personal assets -- because really, it's not. It's for your child.
What can the money be used for? Pretty much anything that isn't already be taken care of by other benefits. So, for Sammy, we're using the money from her trust for therapies, perhaps orthotics if her insurance denies them...transportation expenses to Now I Can in September...Based on Samantha's situation right now, we could use her trust money for pretty much anything it seems. But we've reserved it as a place to hold for those "special" expenses. And hopefully, over time, it will grow. As we save for each child each year, we'll put a little bit in her trust. And as she receives gift money for birthdays or Christmas -- if there isn't anything that I feel like she needs right then, I'll put it in her trust until I remember that super awesome sensory toy that I think she'll love.
So, the money is accessible? Yes, it would be pretty pointless if it wasn't. The money that is put into the trust is accessible all the time. It's not held for your child until you die. The money is there to be used. You can freely add to it and take from it. Make sure, however, that you keep receipts. At anytime, you can be audited. So, keep track of things. But you don't need to be crazy about it. Your Special Needs Trust will be under a different account. If you have a debit card from the account and pay everything for your child that you plan on the trust money paying for, you'll have bank statements that have it all documented I assume. It may take some simple organization in the beginning, but unless you are planning on purchasing everything for your child with the trust money, it's pretty easy stuff.
What happens if I outlive my child? (sigh) Who wants to think about this? But, it's a reality, right? And something that we need to know in the event that this happens. In terms of your money, you choose where they money would go. Most parents choose to have the money go back into their own account in the event of the above mentioned question. However, you can put in the trust terms and conditions that the money is to go to a charity, divided evenly among siblings, etc. It's up to you. Now, in terms of your heart, I'm not sure what happens. And I dread even the thought of it.
Like I said, our experience setting it up was easy, fast, and made me feel secure. Nice. Run out and set up a Special Needs Trust? Maybe if it's on your mind already. If not, definitely consider it. Do your research. Ask other special needs parents what they've done. The consensus from all financial planners I know (and I know a surprising amount) all say it's one of those "definitely do" items when it comes to financial security in the future for your child/children. Even if you only start with $100 in the trust, you're beginning the process of setting up security for when you are gone.