You want your children to have the best life possible, which means supporting them when they are young. In some cases, you may need to continue to support them for the rest of their lives or even after you die.
Creating a special needs trust is a popular way to provide for a child who won’t ever live independently. Whether you have a child who suffered a brain injury in a car crash or a loved one born with a condition like Down syndrome, they may require financial and practical support for the rest of their life.
You can help provide for them as a parent or other family member through the creation of a special needs trust. Unlike gifts or a big inheritance, a trust isn’t directly in the control of an adult with special needs. Instead, it offers support in the form of trustee oversight and distribution of trust assets. As you plan the trust and make decisions about when the beneficiary can make withdrawals, it’s important to consider the state benefits they may eventually need.
Medicaid and other important benefits have income limitations
If you want your loved one to qualify for Medicaid, subsidized housing or other important state benefits, they will need to meet strict financial requirements. For example, income of just $1,500 a month might disqualify someone for Medicaid benefits in Colorado.
You need to consider these restrictions when you structure the trust. Using the right language and placing appropriate limitations on disbursements will be an important protection for your loved one. They likely won’t always think about the secondary consequences of a financial decision before making it.
By putting the rules in place yourself that will limit them from making withdrawals that end their benefits, you will protect them from financial hardship in the future and help them pursue the most independent life possible.
You can allow for changes to reflect future restrictions
You don’t necessarily have to create a hard and fast financial limit for disbursements from the trust. You might create guidelines and rules that refer to the limitations of the programs that your loved one will require. That way, if the income allowable creases, your loved one can increase what they withdraw from the trust as well.
Thinking about what supports your loved one’s needs can help you better plan to support them with a special needs trust.