Special Needs Trusts and Your Planning

Government programs are available for many disabled people, but government funding typically does not cover expenses, such as transportation costs to visit family members, reading material and even toiletries. Parents generally take care of these costs while they are alive but worry about what will happen thereafter.

Estate planners often suggest parents establish a special needs trust that will benefit a son or daughter but safeguard qualification for government assistance. The trust typically would allow the trustee discretion to provide nonessential services and items to the child, such as piano lessons or recreational equipment. These trusts must be carefully drafted to comply with state law.

Funding for a special needs trust can be accomplished through investments or, commonly, life insurance. The IRS has approved charitable remainder trusts that provide ongoing funding for a special needs trust established for a family member. Assets in the special needs trust could pass at the beneficiary’s death either to charitable or family beneficiaries. Proceeds from the charitable remainder trust would be paid, of course, to a qualified charity.

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