How Can You Provide For Your Special Needs Child After Your Death?

If you have a child with special needs, you have more concerns than many parents. Not only are you focused on your child's current health, safety, and happiness, but you're likely worried about your child's ability to provide for him or herself in the future. Luckily, there are a number of estate planning tools that can help you provide for your child's care and education well into the future. Read on to learn more about how to establish a special needs trust for your child.

What is a special needs trust?

A special needs trust can take several forms, depending upon the type and severity of your child's disability. However, all special needs trusts have one thing in common -- they are meant to pay for your child's basic needs (and any skilled care required) for the rest of your child's life.

For most traditional wills, funds and assets are distributed to heirs as provided by the will. However, trusts do not make these distributions directly. Instead, a trustee is appointed and given the responsibility of accepting disbursements from the trust and providing for the care of any of the trust's beneficiaries. This provides a few specific advantages over a direct distribution, which are discussed in more detail below.

What types of special needs trusts are available?

There are two primary categories of special needs trusts -- testamentary trusts, which are created by a will upon the grantor's death, and independent trusts, which are established and funded while the grantor is still living.

  • Testamentary trusts
    • A testamentary trust is ideal for young parents or those who expect to accrue more assets in the future. Because you can direct the disposition of assets within your will without naming the specific assets, there is no need to amend your will (or the resulting trust) whenever you acquire additional assets.
  • Independent trusts
    • Independent trusts are ideal for those whose children have reached adulthood or who are establishing a trust later in life. To fund this trust, you'll need to place property within the trust. However, after property has been placed within the trust, you are unable to use it for your own purposes unless it is revoked from the trust. The one exception to this is your primary residence -- if it is placed in the trust, you can retain a "life estate," which allows you to remain in the home until your death.

How can you ensure your trust is sufficiently funded?

Even if you don't have substantial assets at your disposal, you can ensure that the trust will help fund a lifetime of care for your child. One way to do this is to purchase a life insurance plan and make the proceeds payable to the trust. Many life insurance policies are available at very low cost and can provide peace of mind.

What are some advantages of a special needs trust?

Two of the primary advantages of a special needs trust are its protection from creditors and the security of a trustee. In general, even if your child incurs some type of consumer debt, the creditor is unable to seize the trust's assets for the repayment of this debt -- ensuring that your child cannot be financially taken advantage of.

The trustee provides an additional protection against those who may not have your child's welfare in mind. As the person responsible for the disbursement of the trust proceeds, the trustee has a legal and ethical responsibility to act in your child's best interest. The process of choosing a trustee can be difficult, but once a trustee has been designated, you can rest assured that your child will be well taken care of even after your death.

For more information, contact a local estate lawyer