Many parents seek to ensure their special needs children are well-cared for when they can no longer provide that care. A special needs trust offers this peace of mind, yet some families may delay this important financial planning step.
Why you should act now
With a special needs trust, you can allocate funds and assets for your child’s future. Setting up one as soon as possible, ideally before your child turns 18, can help:
- Protect government benefits: A special needs trust allows your child to receive financial support without losing eligibility for programs like Medicaid and Supplemental Security Income (SSI).
- Ensure quality of life: The trust can fund additional expenses not covered by government benefits, such as entertainment, travel and personal care items.
- Peace of mind: Establishing a trust now ensures your child’s financial future is secure, even after you are gone.
- Tax benefits: In some cases, special needs trusts can offer tax advantages for the family.
In California, special needs trusts fall under the California Probate Code. The state recognizes both first-party and third-party special needs trusts. First-party trusts use the beneficiary’s own assets, while third-party trusts’ funds come from others, typically family members.
How to set up a special needs trust
To establish a special needs trust, select a trustworthy trustee (a family member, friend or professional) to manage the trust and make informed decisions about fund allocation. Next, fund the trust with assets such as money, property or other investments. The trust document outlines the terms, including how to use the funds to benefit your child.
Although this process seems straightforward, the complexities of special needs trusts require professional guidance. An experienced attorney in California can advise on the best approach for your family, considering factors like tax implications and long-term care planning.