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Can a Special Needs Trust Protect My Child’s Inheritance?

As the parent of a child with special needs, you are likely aware of the heightened importance of having a well thought out estate plan in place. Every parent wants to make sure they leave something behind for their children after they are gone; however, for the parent of a child with special needs, the desire to leave behind sufficient assets to help with the child’s care and maintenance well into adulthood is very strong. Accomplishing this goal, however, can be a bit tricky because of the impact an inheritance can have on the child’s eligibility for assistance programs. Fortunately, a special needs trust may be able to help by ensuring continued eligibility for benefits and protecting your child’s inheritance.

The Problem with Direct Gifts

As the parent of a child with special needs, you know that caring for someone with special needs can be expensive. Medical bills, various types of therapy, and specialized equipment are just a few of the extra expenses likely to be incurred when caring for someone with special needs. Moreover, those expenses do not end when your child reaches adulthood. Fortunately, there are assistance programs, such as Medicaid and Supplemental Security Income (SSI), that help defray those costs. Once your child reaches the age of majority, however, he or she will need to qualify for assistance as an adult. This means meeting income and asset eligibility requirements. If your child has income and/or assets that exceed the program limits, eligibility for assistance will be lost. As a parent, you may wish to gift assets to your child in your estate plan to supplement the assistance your child receives from assistance programs.  Your good intentions, however, can cause your child’s assets to exceed program limits because once your child reaches the age of majority any assets gifted to him/her will be counted when applying for government benefits. Your well-intentioned gift, therefore, can do more harm than good unless you plan ahead by including a special needs planning component in your comprehensive estate plan.

How Can a Special Needs Trust Help?

As a parent, your goal is to leave behind assets to help ensure that your child has everything he or she needs after you are gone. Since leaving those assets in the form of a direct gift in your Will is not a good idea, you need another option. A special needs trust is often the best solution. A “special needs trust”, also referred to as a “supplemental needs trust,” is a specialized trust that can be used to provide “supplemental” care to a special needs individual above and beyond the care provided by state and federal assistance programs such as Medicaid and Supplemental Security Income (SSI). When a special needs trust works as intended it provides funds that can be used to pay for things such as vacations, transportation, and numerous other things your special needs child may need. There are also certain things a special needs trust cannot be used to pay for though. For a trust to be recognized as a special needs trust by the various state and federal assistance programs very precise language must be used in the trust agreement documents, making it even more important to work closely with your North Carolina estate planning attorney during the creation of your trust. Once your trust is created and active though, it can be used by any and all family members and/or loved ones to contribute to your child’s continued care and maintenance when you are gone. Be sure to explain to anyone who may wish to leave your child a gift in his/her Will that gifts need to be made to the special needs trust you created instead of directly to your child to ensure that a well-intentioned loved one doesn’t create problems with your child’s eligibility for benefits down the road. If you believe a special needs trust is something that should be included in your estate plan, consult with your North Carolina estate planning attorney.

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If you have additional questions about adult guardianship in the State of North Carolina contact the experienced elder law attorneys at The Law Offices of Cheryl David by calling 336-547-9999 to schedule an appointment.

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