Set Up a Self-Settled Special Needs Trust for Your Child Now

November 9, 2008

If you have already established a “third-party special needs trust” for your child – that’s the one that will receive her share of your estate when you pass away – congratulations.  Now it’s time to set up a “self-settled” special needs trust.  This trust will be a depository for any of your child’s own assets.  “But my child doesn’t have anything,” you say.  But she could in the future.  Perhaps a relative will leave her something, or perhaps she will receive a personal injury settlement.  

For reasons that no one can explain, Congress mandated that a trust holding a disabled person’s own assets (self-settled) can only be established by a parent, grandparent, guardian, or a court, and not by the disabled individual herself.  If your child comes into funds in the future and you and her grandparents are not able to meet with an attorney to draft a trust, she will be forced to use the court or a guardian, both of which add unnecessary costs to the process. 

Also, as you may know, SSI has strict rules about how long an SSI recipient can hold onto funds before they are considered assets and threaten her monthly benefits.  If your child receives some money and does not have a self-settled special needs trust already set up, then you will need to hustle to draft it, sign it, obtain a TIN from the IRS, open an account at the bank, and deposit the proceeds – perhaps all within a matter of days.  

Instead, it is easier to set up the trust now and it will be ready and waiting when it comes time to fund it.  If you are reading this article, then you are in the mode of putting your child’s legal documents in order.  Have your disability law attorney draft a self-settled special needs trust now while you are thinking about it.  You don’t need to fund it now, all you need is to have the signed document in your file.  That way it will be immediately available for your child’s use should she ever come into some money of her own. 

A Family Only Needs One Special Needs Trust

November 6, 2008

Have you set up a Special Needs Trust (SNT) to receive your disabled child’s share of your estate when you die?  Are there other family members who might also want to leave something to your disabled child, for example grandparents or a doting uncle?  Or even non-family members, such as god-parents or very close friends?

If so, be sure to tell them about your trust – there is no need for them to spend time and money asking a lawyer to draft another special needs trust as part of their own estate planning package.  That person’s attorney will simply need to see a copy of your special needs trust and she will reference it in your family member’s will. 

While it may feel awkward, you will save your family time and money by mentioning to them that you have already established a trust for your child and that they can direct inheritances into it rather than drafting separate trusts with their own attorneys.