The role of a parent is educational and protective. You have to provide your children with basic resources and also teach them how to safely navigate the world. Most parents will get to watch their children mature and achieve independence, but some children will always need support.
Children with special needs may never achieve the same independence as their peers do. Their unique medical conditions may limit employment and living opportunities as adults or require that you provide practical and financial support for the rest of their life.
Thinking about what happens when you are no longer able to provide for your child can help protect them from unnecessary struggles after your death.
A large inheritance may not benefit a child with special needs
Your estate will determine the legacy you leave for your children and other loved ones. Many parents will try to leave as much as possible for their children when they die. A large inheritance could help your children pay off their student loans or even help send your grandchildren to college.
Receiving a significant inheritance can be a life-altering experience, but the changes created by an inheritance aren’t always positive. A big inheritance can have tax implications. It can also affect whether or not someone qualifies for certain state benefits, like Medicaid.
Your child with special needs could lose the aide that they count on for daily living needs because of what they inherit. A large inheritance could also lead to bad decisions, especially if there is no one to support or guide your child with the use of those resources.
How a special needs trust helps
When you want to leave resources to support your child with special needs but you don’t want to give them direct control over thousands of dollars worth of property, a special needs trust can help you.
When you create and fund a trust, you can put limitations on how much money people can withdraw each month or each year, helping to preserve their eligibility for certain financial and medical programs. You also get to name a trustee who oversees trust resources. A trustee can manage finances on behalf of your loved one and help protect them from frivolous spending and financial abuse by people outside of your family.
Integrating a trust into your estate plan can be an excellent way to support someone with special needs in your family.