Many people in California tend to put off estate planning, at least until they near retirement age. This is a big mistake for many people, especially those with children, because legally documented guardianship and financial plans should be in place should?children ever?suddenly lose their parents. When California parents have children with special needs or disabilities, it may be even more important to ensure a well-thought out and clear estate plan, complete with a trust, exists.
In the early 1990s, the Special Needs Trust came into existence so that those who collect government benefits, such as Supplemental Security Income or Medicaid, would not lose their eligibility for benefits if they inherit money. These third-party trusts are often set up by parents and grandparents in order to leave money to a child who is disabled.
Rules about special needs trusts do vary from state to state. In general, an independent trustee is set up to oversee the funds in the trust and the trust can be set up as cash, mutual funds, stocks, or in a number of different ways.
Some parents might be thinking that they would like to set up a trust for a disabled child, but they do not have the assets to put into it. Parents, however, can even fund such trusts with a life insurance benefit. That way, should a life insurance benefit be issued it would go directly into a trust rather than arrive as a check for a child, as the latter may negate a child's SSI benefit eligibility.
Of course, no one likes to plan to leave their children far too soon. However, it is important to have an estate plan in place and keep it updated to avoid any unintended consequences of passing down an inheritance or other assets.
Source: Zanesville Recorder, "Special Needs Trusts needed in some situations," Nov. 17, 2012
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