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Provide financial security for disabled children with a special needs trust
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Any parent should plan for a child's future in case the parents should pass away before the child has grown. When your child has disabilities, the planning is both more critical and more complicated. A special needs trust protects the money you put aside for your child's care without jeopardizing public benefits.
Recently I attended a meeting on special needs trusts for children with hydrocephalus. I will summarize the information we received but you should consult with an attorney if you have any questions.
When planning for your child's future, you should consider the child's eligibility for government programs. Medicare and Social Security Disability are not needs based; eligibility is based on disability, not income or assets. However Supplemental Security Income and Medicaid are based on financial need. In Arizona, Medicaid is called AHCCCS (pronounced "access") and provides medical coverage to many populations in Arizona including people with disabilities. If you place more than $2,000 in your child's name, he would no longer be eligible for AHCCCS and would lose his medical insurance.
Some parents mistakenly believe they must leave disabled children nothing in their wills so the children can keep their government benefits. This is completely untrue. Money placed in a special needs trust will not jeopardize program eligibility. The inheritance and other financial transactions must be set up so the money goes directly into the trust rather than to the person with disabilities. Any expenses should be paid from the trust. In this way, the child never "owns" the money and AHCCCS eligibility is not threatened.
In order to set up your will and the trust correctly, consult with an attorney experienced with special needs trusts. Ideally you want an estate planning attorney who has not only set up special needs trusts for children, but has administered them after the parents have died. The trust should be part of a comprehensive planning package that includes life insurance, a living will, and other estate planning. While none of us like thinking about dying, we must take action to protect our family's financial security.
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