The Special Needs Trust
How to Leave an Inheritance to a Disabled Child
By M. Keywood Deese, Vision Bank, Texoma LIVING WELL Magazine
If you are the parent or grandparent of a disabled child or young adult, you have several special estate planning challenges. If the disabled child or disabled adult is receiving support from the state or federal government, they usually cannot have more than a small amount of assets held in their name. For example, if they have more than $2,000 in a checking or savings account in their name, this could threaten their government benefits. So how do you leave a gift or inheritance to that disabled heir without losing their government benefits?
Often a Special Needs Trust is established by the grandparents or parents for the benefit of a physically or developmentally disabled relative. These are irrevocable trusts thereby removing the trust assets from the grandparents’ or parents’ estate for tax purposes. The purpose of the trust is to provide non-essential future needs above the basic food, clothing, shelter and medical expenses that are typically paid for by local, state and federal agencies. The use of this type of trust will not jeopardize the beneficiary’s continued eligibility for federal or state aid.
The trust funds can be used for special educational and travel benefits that will promote the beneficiary’s happiness and welfare. Our bank has many of these types of trusts. We have sent many children and young adults to Disneyland or purchased special computers and music related Christmas or birthday presents from the trust funds. After the disabled beneficiary’s death, the remaining funds or a portion of the funds are often left to other grandchildren or to the facility where the beneficiary resided as a charitable donation.
Visit with an attorney who is experienced drafting this type of trust. The trust agreement must include very special language to avoid causing problems with the government benefits. This is definitely not the type of trust for amateurs to prepare on their home computers!
M. Keywood Deese is Senior Vice President & Trust Officer at Vision Bank, N.A. of Ada, Oklahoma.
