When you have a child with a disability, you may have to consider how your child might support himself or herself once you are not around to help. Many parents of children with disabilities seek to help secure the futures of their children by creating something called a special needs trust. Several different types of special needs trusts exist, and they offer different benefits and terms.
Regardless of what type of special needs trust you create, doing so offers some significant advantages for your child. The main reason you may want to consider creating a special needs trust is that doing so gives you a way to leave your child assets without those assets potentially making him or her ineligible for government benefits.
Retaining access to government help
Your child with a disability may use Medicaid, Supplemental Security Income or other types of assistance to get by. However, he or she must undergo means-testing to utilize these benefits. Leaving your child assets in a traditional way may mean he or she has too much income to qualify for these benefits. Leaving them in a special needs trust, however, safeguards them and makes it so they do not come into play during means-testing.
Understanding types of special needs trusts
There are two main types of special needs trusts: the first-party trust and the third-party trust. The first-party trust contains assets that belong to the beneficiary, while someone other than the beneficiary funds the third-party trust.
The type of special needs trust that may suit your needs better may depend on the specifics of your situation.