Assuring children have financial security throughout their lives is a critical duty. It is even more vital when the offspring bear special needs.
Fortunately, setting aside money for a child with challenges can be easy. This is especially true if one embarks on the task already knowing the possibilities.
Option #1: Create a first-party trust
This financial instrument is for assets going directly to an heir. A trust administrator spends the money in this account on behalf of the beneficiary. There are no restrictions on what the funds may go toward.
After the trust holder passes, the remaining dollars must repay Medicaid debts. Only then may other distributions happen.
Option #2: Create a third-party trust
Usually, an extended family member is the one to establish this type of trust. Holdings can be a wide array of assets. Examples include investment portfolios, real estate and life insurance policies. Limits on fund usage are minimal.
Option #3: Create a pooled special needs trust
This alternative often makes sense for those with several special needs dependents. A nonprofit organization assumes control of the trust. Subaccounts make sure each beneficiary receives an appropriate amount. Although allocations are usually equal, they can differ if circumstances warrant it. Assets go to the surviving beneficiaries after a recipient dies.
Naming an appropriate administrator remains a crucial decision under all scenarios. Assigning power of attorney to someone else provides safety if the first person becomes incapacitated. Caregivers should consider an ABLE account instead if choosing someone seems overwhelming.
Since those with special needs cannot care for themselves, parents must step up to the plate. Much like their love, fiscal responsibilities extend into the afterlife.