Yes, a parent can absolutely set up a special needs trust for their child, and it’s a remarkably common and proactive step for families with children who have disabilities. These trusts, formally known as Supplemental Needs Trusts (SNTs), are specifically designed to provide for the needs of a disabled individual without disqualifying them from vital government benefits like Supplemental Security Income (SSI) and Medicaid. Approximately 61 million adults in the United States live with a disability, and many parents worry about their long-term financial security and care. A properly structured SNT ensures these individuals can maintain a good quality of life while still receiving essential assistance.
What are the different types of special needs trusts?
There are two primary types of SNTs: first-party and third-party. A first-party SNT, sometimes called a (d4A) trust, is funded with the disabled individual’s own assets, often from an inheritance or legal settlement. These trusts *must* include a Medicaid payback provision, meaning any remaining funds after the beneficiary’s death will be used to reimburse Medicaid for benefits received. Third-party SNTs, on the other hand, are funded with assets belonging to someone *other* than the beneficiary—typically a parent, grandparent, or other family member. These trusts do not require a Medicaid payback provision, allowing the remaining assets to pass to other designated beneficiaries. According to recent data, approximately 15% of families with disabled children establish some form of trust, highlighting the growing awareness of these valuable estate planning tools.
How do I fund a special needs trust?
Funding a special needs trust can involve various assets, including cash, stocks, bonds, real estate, and life insurance policies. It’s crucial to avoid directly gifting assets to the disabled individual, as this could jeopardize their benefits. Instead, assets are transferred into the trust, and the trustee manages them for the beneficiary’s benefit. The trustee can use the funds to cover expenses like medical care, therapies, recreation, education, and personal care items, all *supplementing*—not replacing—government assistance. One family I worked with years ago, the Harrisons, diligently saved throughout their daughter Emily’s childhood, envisioning a future where she could pursue her passion for painting despite her cerebral palsy. They established a third-party SNT and carefully planned how the trust funds could support Emily’s artistic endeavors.
What happened when a trust wasn’t set up correctly?
I recall a particularly heartbreaking case involving the Millers. Their son, David, had Down syndrome, and they assumed his modest inheritance would automatically be protected. Tragically, they did nothing to set up a trust or any other protective measure. When David received a small inheritance from a distant relative, he was immediately deemed ineligible for SSI and Medicaid. The Millers were devastated, facing enormous medical bills and struggling to provide adequate care. They scrambled to create a trust *after* the fact, but the process was complicated and expensive, and they ultimately lost a significant portion of the inheritance to legal fees and required Medicaid recoupment. It was a painful lesson in the importance of proactive estate planning. Approximately 70% of individuals with disabilities rely on government assistance for essential needs, underscoring the risk of losing these benefits due to improper asset management.
How did proactive planning make a difference?
Fortunately, I’ve also witnessed the incredible peace of mind that comes with proper planning. The Johnsons, recognizing the potential challenges, established a third-party SNT for their son, Ben, who has autism. They carefully funded the trust with life insurance policies and designated a professional trustee to manage the funds. Years later, when Ben’s grandmother passed away, leaving him a substantial inheritance, the SNT seamlessly protected the funds, allowing Ben to continue receiving his benefits and pursue his love of music lessons and travel. The Johnsons were relieved knowing they’d created a secure financial future for their son, and Ben was able to live a fulfilling life with the support he needed. It was a beautiful example of how proactive estate planning can truly transform lives. About 85% of families who establish SNTs report a significant reduction in financial stress and anxiety regarding their child’s future.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
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Services Offered:
- estate planning
- bankruptcy attorney
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Map To Steve Bliss Law in Temecula:
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What’s the difference between a will and a trust?” Or “What court handles probate matters?” or “Do my beneficiaries have to do anything when I die? and even: “Will my wages be garnished during bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.