Special Needs Trusts for Children with Down Syndrome
All parents want their children to be happy and to enjoy long-term financial stability, and parents whose children have Down syndrome often believe the best way to accomplish this is to leave money to their children using a Will, a life insurance policy, or a retirement account. However, leaving money directly to the child can disqualify him or her from receiving much-needed benefits. For example, under SSI rules, a recipient is limited to $2,000 in assets. If a recipient has property valued more than this amount, his or her benefits are suspended until those assets are “spent down” below the $2,000 threshold.
This means that the unintended consequence of an inheritance or even a big gift from grandma could result in a loss of valuable benefits.
What is the best way to plan for long-term financial security for your child? One solution is to establish a Special Needs Trust.
Under the terms of a Special Needs Trust, a Trustee manages trust property to ensure that it will remain a long-term source of funds for the child. The Trustee has discretion to distribute trust assets to (or on behalf of) the child, as long as he or she follows strict rules that forbid the use of Special Needs Trusts for any of the services covered by government benefits. In a nutshell, Medicaid and SSI benefits continue to cover the basics, while trust assets can be used to provide a child with the “extras” that enhance quality of life.
Often, parents opt for a Special Needs Trust that goes into effect when they die, but this isn’t the only choice. You can also establish a trust that takes effect during your lifetime. There are a number of advantages to establishing such a trust. For instance:
- Substantial gifts to your child from grandparents and other family members can be paid into the trust without fear that they’ll interrupt your child’s benefits.
- Funds you have earmarked for your child’s care can be transferred to the trust. After the transfer, they’ll be treated as separate assets – not yours and not your child’s. This way, the funds will be out of reach of your creditors and safe in the event of divorce. The Trustee you’ve selected will manage them on behalf of your child, so you can rest assured the funds will be put to their best possible use.
Compliments of Falk, Cornell & Associates, LLP
An Estate Planning Law Firm in Palo Alto, CA
Written By: The American Academy of Estate Planning Attorneys
Falk, Cornell & Associates, LLP offers a complimentary 30 minute consultation to discuss your personal estate planning situation and assess the best estate planning strategy for you and your family. For more information about Special Needs Trusts, talk to one of our experienced estate planning attorney by scheduling your estate planning consultation today. Call our office at (650) 463-1550 or complete our “contact us” form on our website http://falkandcornell.com/contact-us/