Who will take care of your child with special needs when you are gone? If you have spent time reading articles about estate and special needs financial planning, you have probably got the message that setting up a special needs trust for your child is essential.
Setting up a special needs trust gives you a chance to leave financial assets or wealth to a loved one living with a disability. It is also a safe way to avoid jeopardizing their eligibility to receive Medicaid benefits and supplemental security income (SSI).
When setting up a special needs trust, there are several things you need to think about. Here is a top-five list of some of the most important things to consider when setting up a special needs trust for your loved one living with a disability.
Things to consider when setting up a special needs trust
1. Choosing a trustee
This is one of the most difficult decisions you will be making when setting up a special needs trust.
Typically, a special needs trust has two parties. The trustee and the beneficiary. The trustee manages the funds while the beneficiary is the receiver of the funds.
When setting up the trust fund it is important to look for a reliable trustee who you have complete faith in. This is because the trustee has the ultimate power and responsibility for the use of the funds. They will, therefore, be controlling and making decisions on the use of the funds on behalf of the person living with a disability.
When choosing a trustee we recommend looking for one who;
– Knows and understands the needs of the beneficiary
– One who does not violate rules of the trust fund
– One who can budget and plan for the long term and,
– One who can invest wisely and keep accurate records
2. Hiring a lawyer – is it important?
There is no law requiring you to have a lawyer when setting up a special needs trust for your loved ones. It’s all up to you.
However, hiring a lawyer can help you avoid making mistakes and also enlighten you on some important things you might miss when setting up the trust. With a lawyer, you won’t have to worry about missing any important steps which may be detrimental or turn out to be a time-consuming fix in the future.
3. How much money should go in the trust
It can be hard to define how much you should put in the trust. The best answer, however, is ‘as much as possible.’
There is usually not enough to set apart for a child’s entire support. Therefore setting as much as you can for your child is very important. However, if you have other children to consider, it is necessary that you bring in the help of a special needs planner in your financial planning for the future of all your children.
4. Should it be revocable or irrevocable?
In most cases, special needs trusts are set to be revocable if it’s only the parents that are contributing. This means that the parents can make changes any time they need to.
However, if you have other people, such as grandparents, aunts, and uncles contributing to the trust, it is important to make it irrevocable. This ensures that no one is able to change or reclaim what they had offered to the trust.
5. What will the funds be spent on?
It is important to pay attention to what the funds in the trust are spent on. The trustee can pay for anything required by the person with special needs as long as it is not against the policy or does not violate the terms of use of the trust. However, note that some payments for basic needs such as food and shelter may make them ineligible for SSI.
Hence, it is always important to get professional help to identify the full extent of what you can spend the funds on.
Final word,
Creating a special needs trust is the only safe way to shelter and manage whatever you bequeath to your loved ones with a disability. Therefore, a careful plan is always necessary when ensuring the future of your loved ones with a disability is well catered for.
