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5 Issues to Consider When Creating a Special Needs Trust

While day-to-day obligations can certainly get in the way, at some point, as a parent of a child with special needs, you will need to create a special needs trust to shelter and manage whatever you may leave your child upon passing away. This is the only safe way to make sure that the funds you leave are protected and well-managed and that the child, who by then is probably an adult, can continue to qualify for vital public benefits.

Special-Needs-Trust-Wellesley-Estate-Planning

Here are some of the questions you will need to consider in guiding their attorney to create the trust:

  1. Choice of Trustee.  This can be the most difficult decision because the trustee will have ultimate power and responsibility over how the trust funds are invested and spent for the beneficiary. The trustee must know and understand the beneficiary’s needs, make sure not to violate the rules of any public benefits program, budget for the long term, invest wisely, and keep accurate accounts. We often find that the best solution is to have both a family member and a professional trustee share the role as co-trustees—the family member seeing to the beneficiary’s needs and the professional trustee making sure all of the administrative requirements of the trust are satisfied. In addition, it can often be easier for the professional trustee to limit trust spending, if necessary.
  2. Revocable or Irrevocable. In most instances, the special needs trust should be irrevocable, especially if other people, such as grandparents or aunts and uncles, might contribute to it. If the expectation is that only the parents contribute to it as part of their estate plan, then the special needs trust can be revocable, meaning it can be changed it at any time.
  3. How specific should the trustee directions be? As a parent, you should provide the trustee with as much guidance as possible to make sure that your child gets the best care and support, and that your innate knowledge about her needs and wishes is not lost.  But this information often is best imparted in a side document—a memorandum of intent—rather than in the trust itself.  The trust needs to be discretionary and relatively unlimited so that the trustees can react to future realities, whether they have to do that according to your child’s development or changes in laws and services available.
  4. What about a trust protector or care committee? Some special needs trusts include a so-called “trust protector” to oversee the work of the trustees or a “care committee” to advise the trustees about the beneficiary’s needs. These additional parties can contribute significant benefits and help reduce worry about how the trustees will act on behalf of your child. But these mechanisms should be used only on a case-by-case basis, where benefits outweigh the added cost and difficulty of involving additional people in the trust management.
  5. How much money should go into the trust?  It’s hard to get a definite answer on this question, other than “as much as possible.” This is because there’s usually not enough to pay for a child’s entire support. However, if you have other children you’ll want to be fair to them as well. The availability of public benefits programs, of course, lowers the need for self financing, but no one can be sure what will happen to existing programs in the future. A financial planner who specializes on special needs financial planning can help with these calculations. One solution many of our clients choose is to divide their estate equally among all of their children, but to provide additional funds for the special needs trust through life insurance.

These are not easy questions. Nevertheless, with the assistance of an experienced special needs planner, you will find solutions. Just make sure you don’t fall into the trap of the perfect being the enemy of the good. It may be impossible to find the ideal solution for your child. But any plan is far better than no plan. Additionally, whatever plan you put in place now should be reviewed and updated as your child gets older and circumstances change. Act now. Then take another look in a few years.

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