As the parent of a disabled or special needs child, you may have concerns about exactly what will happen to your child once you pass on and cannot provide for, or look out for, that child yourself. Financing the lifetime costs of care for a special needs child can add up to millions of dollars. Unless you are careful when setting aside funds to cover caring for your child, you may impact his or her ability to receive and utilize government benefits.

How? In many cases, disabled or special needs children receive Medicaid or Supplemental Security Income assistance to help them support themselves. However, leaving your special needs child funds or assets in a traditional will can potentially make your son or daughter ineligible for these benefits. You may, however, leave money behind for your child without affecting his or her eligibility for federal assistance. Many people in your shoes do so by creating a special needs trust.

Understanding the special needs trust

A special needs trust is a third-party trust that gives you a channel through which you can leave assets behind for your disabled child while still allowing him or her to receive other forms of assistance. The assets you place inside the special needs trust are not the direct property of your child, which is why they do not come into play when assessing your child’s eligibility for other forms of government benefits. You can use several different methods to fund a special needs trust. Many people do so by using life insurance policies, stock or mutual fund investments, military benefits or similar sources.

Benefits of special needs trusts

While allowing your child to remain eligible for other forms of assistance is a primary benefit of a special needs trust, another benefit involves the fact that the funds inside the trust can go toward other expenses once your disabled child passes. For example, the funds inside can go to other family members or charitable causes once the intended recipient passes away.

In summary, creating a special needs trust is a solid way to provide for your child’s future without impacting him or her negatively in other ways.