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Providing for a special needs child after your death

Having a child with special needs comes with its own set of challenges. As a parent, you more than likely do whatever you can to give that child a good life. Part of doing so involves providing for him or her financially. During your life, this may not always be easy, but you work every day to do so.

Like other parents here in New Jersey who have special needs children, you may wonder what will happen to your child after your death. This is where estate planning comes into play. You may consider a trust to provide for your special needs child, but not just any trust will do.

A brief explanation of trusts

A trust holds assets on behalf of someone else (the beneficiary). The trustee administers the trust, which includes managing the assets and making distributions to the beneficiary in accordance with the terms of the trust. More than one type of trust exists, and it's crucial that you choose the right one to achieve your purpose.

What kind of trust does my child need?

Many children with special needs receive assistance from government programs. Your child may receive subsidized housing, vocational training and Medicaid, among other things. These programs require certain financial conditions of those who receive their benefits. No matter how well intentioned, the wrong type of trust could disqualify your child from receiving much needed assistance. One type of trust, however, falls under a distinct category designed to protect your child's access to these programs -- the special needs trust.

Even if government programs are not yet a concern for your child, he or she may need them in the future. In addition, a special needs trust addresses your child's needs where other trusts may not. Inheritances, personal injury claim proceeds and other funds can be placed into the trust without jeopardizing the real or potential need for assistance. It could also keep creditors, anyone who would sue your child or others from accessing the assets you put into the trust.

Special language for a special needs trust

When it comes to providing for your special needs child, you will need a special needs trust. It contains certain language and terms that work to protect your child.

  • You must specify in the trust that the assets provide extra or supplemental care for your child beyond any government assistance.
  • You must specify that the trust is not meant to provide basic care.
  • You must outline the trust's exclusion from the Omnibus Budget and Reconciliation Act.
  • You may not include the estate tax exemption known as the "Crummey Clause."
  • You must include repayment of Medicaid language.
  • You must include copies of the parts of the United States Code that apply to the trust.

You must also include the special provisions in the Social Security Operations Manual that allow you to create the trust. It is also important that your child not have direct access to the trust. This could negate what you are trying to do.

Do you need an attorney to set up this type of trust?

Many do-it-yourself options are available for setting up a special needs trust. However, the failure to set up this trust correctly could cause issues for your child that you cannot fix once you pass away. The peace of mind you can gain from knowing that the trust is set up properly may be worth the time, money and effort of enlisting the aid of a New Jersey estate-planning attorney.

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