If you are the parent of an adult child who has a disability, you may have little choice but to encourage him or her to apply for public benefits. After all, Supplemental Security Income, Medicaid and other needs-based government programs help Americans with disabilities pay living expenses and access basic medical care.
As you may suspect, means-tested government programs do not cover much else. They also do not give recipients funds to use on expenses that improve quality of life. Luckily, setting up a special needs trust may help you strike the right balance between public assistance and a monetary gift.
What is a special needs trust?
According to AARP, a special needs trust holds money for the benefit of a person who has a disability. Because the trust does not give cash or other assets to the beneficiary, he or she continues to qualify for government help. Still, beneficiaries of these trusts must be careful not to use disbursements to pay for expenses that are similar to those government programs cover.
What expenses are ok?
Generally, the beneficiary of a special needs trust may not use disbursements for living expenses or basic medical care. Everything else, though, has the potential to be fine. For example, your child can probably use funds from the trust to pay for education, travel, electronics, furnishings, home modifications, uncovered medical expenses and other similar items.
Ultimately, your special needs trustee should closely scrutinize all disbursement requests to ensure they do not violate the rules of the public programs that give benefits to your child.