Creating financial well-being for a loved one with a disability with a Special Needs Trust

I am often asked for strategies to help parents ensure the on-going financial well-being for their child with a disability. This becomes an even more critical aspect of the parents’ financial plan as they reach later ages and face the potential of their adult child being left without them.

One strategy is to use a Special Needs Trust that would provide financial resources without jeopardizing other benefits like Supplemental Security Income (SSI).

There are two types of Special Needs Trusts. The Self-Settled, or Self-Funded Special Needs Trust can be set up for a disabled person under the age of 65 by a parent, grandparent, estate guardian or in some cases a court. The trust is managed by a trustee on behalf of a beneficiary and contains specific language regarding how the trust funds are to be used to supplement, but not replace, public benefits. Frequently, the assets in the trust are the result of an inheritance, legal settlement or gift. Upon the death of the beneficiary, the remaining assets in the trust must “pay back” the state Medicaid agency up to the total medical assistance paid on behalf of the beneficiary.

A Third-Party Special Needs Trust is funded with assets from a third party, most often the parent of a person with a disability, but can be established and funded by other relatives or friends. The funds are used to enhance the quality of life of the beneficiary and spent on things that can’t be obtained through public benefits. This type of trust does not have the “pay back” provision and the beneficiary can be of any age, unlike the Self-Settled or Self-Funded SNT. There can also be some tax advantages if the trust is drafted to meet requirements for treatment as a qualified disability trust.

Established in 2003, the non-profit organization, Wispact, manages Special Needs Trusts for more than 3000 people with disabilities in Wisconsin. They have a wealth of information and resources available to inform and educate people about Special Needs Trusts. Besides being able to actually help create the trust appropriate for your case, Wispact can provide other services that help the beneficiary including assistance with paying bills, ensuring funds spent meet the public benefit rules, and approving requests for distribution. Visit for more information.

Public benefit rules and regulations are complicated. It’s important to ensure the Special Needs Trust is properly drafted to adhere to the rules and to applicable tax law.

For many parents of a child with a disability, ensuring the on-going financial well-being of their child is a huge point of worry. A Special Needs Trust may be a strategy to reduce that worry.

As published in the Racine Journal Times | October, 2018

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