How estate planning helps parents of children with special needs

Parents of special needs children in California possess additional reasons to carefully plan their estates. These reasons include guardianship issues, evaluation of available resources and income caps that are applied if the child is receiving Medicaid or SSI benefits.

A special needs trust, or SNT, is a planning vehicle that makes it possible for parents to provide for the care of their special needs children without putting any assistance that the child receives in jeopardy. The allowable uses of SNTs include travel, medical expenses, pet care, entertainment and others.

The SNT is similar to other trusts in that funds included within the trust are protected from lenders, landlords, credit card companies and other creditors. One or more trustees are appointed to oversee the assets in a trust. Trustees can be members of the family, friends or trusted professionals. The person who establishes the trust, also known as the grantor, controls where the funds remaining in an SNT will go in the event that the benefactor dies.

A self-settled or first-person trust is an SNT option available to parents of special needs children. These trusts are helpful when the special needs child is a property owner, receives a settlement from the court or receives an inheritance. A third-party SNT is established and funded by a person other than the individual who becomes the beneficiary. The person setting up the trust often appoints a trustee or co-trustee to represent their interests.

The major difference between the two types of SNTs is what happens to assets after the death of the beneficiary. Trustees for self-settled SNTs are required to fulfill any financial obligations left unsettled by the beneficiary. This obligation does not exist with third-party SNTs.

Providing for the future of their children is an important responsibility shared by all parents, but this duty takes on an additional urgency when the child in question possesses special needs. Individuals interested in establishing a special needs trust for a child or another person may find it helpful to consult with an attorney experienced in these matters.