Parents of children with disabilities are often faced with an uncomfortable question: how will my child be supported after I’m gone? A special needs trust (SNT) can be used to pay for assistive services, education, personal care items, and more—all without impacting someone’s eligibility for government assistance. Parents can establish an SNT to make sure their loved one has the financial resources they need to live comfortably for years to come. Here’s what you need to know about how they work, what they can be used for, and how to make one.
What is a Special Needs Trust?
A special needs trust (SNT) is a document established with the help of an attorney. Guardians can use an SNT to ensure their child or beneficiary has access to valuable resources that can be put toward their care. Because the beneficiary does not own these assets, they do not impact their eligibility for government assistance, such as Supplemental Security Income (SSI) benefits.
Parents and guardians may designate cash, stocks, and property like a how in a special needs trust. These assets can then be directed to specific services and care items that their child needs to live comfortably. Many parents worry about what will happen to their children when they die—it’s only natural.
SNTs offer a way for guardians to ensure that their children will have funds available to use when they can no longer provide for them.
How Do Special Needs Trusts Work?
A special needs trust for disabled adults can help supplement government benefits, like Social Security Income (SSI). Access to social benefits is one of the key legal rights of autistic adults, but individuals with disabilities can become ineligible for assistance if their income exceeds a certain amount. A special needs trust can help.
There are three main types of special needs trusts:
- Third Party: This is the most common type of SNT. It’s ideal for families who want to leave assets for their loved ones without impacting eligibility for government benefits.
- First Party: These SNTs are used to hold assets that belong to the beneficiary, like inheritance and money awarded from legal settlements.
- Pooled: These are established and managed by a non-profit organization. Assets from a group of individuals are combined and invested together, then spent on beneficiaries proportionally. These are a good avenue for those who have no other trust options.
There are three parties involved with SNTs: the donor, the trustee, and the beneficiary. When the SNT is funded, usually after the death of a parent or caregiver, funds from the trust can be used to cover services and personal care costs.
The money goes directly to the service provider or vendor, not the beneficiary. Because the beneficiaries are not the owners of the assets, they can continue receiving government aid while benefiting from the trust funds.
What can a special needs trust pay for?
Special needs trust spending rules include stipulations about what can and cannot be paid for with funds from an SNT. Funds cannot be used to cover basic needs like food and housing. Instead, they are used to supplement government benefits and health insurance. Here are some things that can be paid for with assets from an SNT:
- Education
- Transportation
- Counseling and therapies
- Care managers and caregivers
- Assistive technology
- Uncovered medical and dental services
- Recreation activities and hobbies
- Vacations
How to Set Up a Special Needs Trust
To set up a special needs trust, follow these steps:
- Consult a lawyer: Choose an attorney who offers estate planning services to help you draft a special needs trust.
- Choose the type of SNT: Determine whether a First or Third Party trust is best for your needs.
- Name the trustee: Decide who will manage the trust and make decisions about investments. This can be a trusted individual or financial institution.
- Draft the trust document: A lawyer will help you prepare a legal document outlining all necessary details of the trust, such as its purpose, beneficiary, trustee responsibilities, and spending stipulations.
- Fund the trust: This can happen before or after the primary caregiver passes.
- Set up monitoring: Establish record-keeping measures to ensure trust funds are being used and documented appropriately.
- Update trust as needed: Be prepared to make adjustments to keep up with any changes in laws, circumstances, or individual needs.
Learn More About Disability Resources, Supports, & Services
At NeuroNav, we’re here to help you navigate the ins and outs of life with a disability. We’re committed to providing accurate information, specialized advice, and enthusiastic support for individuals with disabilities and their families.
Residents of California can take advantage of the Self-Determination Program (SDP) to get more personalized support and disability care. NeuroNav’s independent facilitation services are here to guide you through the process and help you find the resources you need to meet your goals. Book a consultation today to see how we can advocate for you.
