What types of special needs trusts are available?

If you are the parent of a child with special needs, preparing for his or her future can be tricky. On the one hand, you want to provide adequately for your child’s future. On the other hand, you do not want to harm his or her eligibility for government benefits. A special needs trust is a way to balance those concerns. Whatever assets you put in a trust for your child go to him or her according to a schedule that you set up. In this way, you can provide for your child when you are gone without pushing him or her over the income threshold for government benefits.

According to Forbes, there are several types of special needs trusts available. One of the following options may suit your family’s situation.

ABLE accounts

These are available due to the 2014 Achieving a Better Life Experience Act. Similar to a college 529 plan, this is a very affordable option in which after-tax dollars fund the trust and the state manages it.

Pooled asset trusts

For caregivers without significant resources, these trusts are available from nonprofit organizations. They combine and invest assets from several different sources, and then distribute funds to beneficiaries proportionately.

Third-party special needs trust

This is a common solution for parents of a special needs child. You fund the trust and name an independent party to serve as the trustee, who will act for your child’s benefit in managing the account. You can name other beneficiaries to receive assets at the end of the primary beneficiary’s life.

To protect your child’s eligibility for government benefits, you should make clear that trust assets are not to go to basic necessities but to expenses that can enhance your child’s quality of life. Examples include entertainment, pet care and travel.

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