If you are raising a teenager who has a serious disability, you may already recognize he or she will be unable to work as an adult. Fortunately, you have the financial means to support your son or daughter during your lifetime. After your death, though, your child may need government help just to survive.
While you may want to leave your teen an inheritance, you must be careful with gifting assets to him or her. After all, your well-intentioned gift may push your son or daughter over the income limit for qualifying for many types of means-tested government benefits.
A special estate planning tool
There is a solution to the gifting conundrum, fortunately. If you set up a special needs trust, you do not give money or other assets to your child. Rather, you place funds in trust for his or her benefit. This means funds in the trust do not qualify as income for purposes of being eligible for government assistance.
Disbursements from the trust
Your child can only use disbursements from the special needs trust to pay for expenses that government programs do not cover. Because these programs provide financial support for housing, utilities, food and basic medical care, using disbursements for these expenses is impermissible.
Still, there are many other items disbursements may cover, including the following:
- Uncovered medical care
- Home improvements
You do not have to worry about your teen using disbursements incorrectly, as you designate a trustee to approve disbursement requests. Ultimately, this trustee can look out for your child’s interests after your death.