Special Needs Trust: How to Build a Plan for Your Family

If you are a parent of a child with intellectual and developmental disabilities, you confront daunting challenges in your daily life and planning for the future. Some of these financial challenges require a special needs financial planner to help make informed decisions and build a strong financial safety net.

Saving money and providing for your child without losing public benefits may also be a problem. These benefits can be significant and may include the following:

• Medicaid
• Medicaid Home and Community-Based Services
• Medicare
• Supplemental Security Income
• Social Security Disability Insurance
• Social Security Disabled Adult Care
• Supplemental Nutrition Assistance Program
• Housing Choice Vouchers

There may be other benefits depending on where you live.

Fortunately, a solution may permit you to accomplish both goals. It’s called a “special needs trust.” However, keep in mind that special needs trusts aren’t right for every situation.

• The beneficiary of the trust won’t have control over the funds in the trust.
• The beneficiary will have to rely on the trustee of the trust, who will have discretion over whether to grant a distribution request.
• The trust may be required to pay back Medicaid upon the beneficiary’s death, which can deplete the remaining assets in the trust.
• There are limitations¹ on what the funds can be used for without impacting eligibility for government benefits like Medicaid and Supplemental Security Income.

Examples of expenses from a special needs trust that may raise issues include cash, food, restaurant meals, rent, mortgage payments, homeowners or condo dues, and utilities.² You can find examples of permissible distributions here.

If you are considering a special needs trust, here’s what you need to know about them.

Jeff Vistica, CFP®, ChSNC®, AIF®

Jeff is the co-founding partner of Valiant Partners, a registered investment advisory firm located in Carlsbad, Calif. Valiant Partners devotes its practice exclusively to serving the needs of parents with special needs children.