After going through a divorce that you and your ex-spouse settled amicably, you plan to set up a financial safety net for your child’s future. As an added component, your child has special needs, and you or your ex-spouse should ensure they can meet these needs independently. You wonder if a special needs trust will help your child face an uncertain future.
What is a special needs trust?
There are three types of special needs trusts or SNTs: first-party trusts, pooled trusts and third-party trusts. They differ in some respects but have the same goal.
- First-party trusts: With your child’s unique needs, the regular scope of Medical Assistance and income assistance may not be enough to make them comfortable throughout their lifetime. Upon approval of a first-party trust, your child becomes eligible for Supplemental Security Income and Michigan’s medical assistance over the legal limit. Upon the beneficiary’s death, the state repays first-party trusts, also known as “self-settled” or “payback” trusts, with the beneficiary’s assets, ensuring your child receives lasting care and protection.
- Pooled trusts: Nonprofit organizations manage these special needs trusts, pooling and investing funds from many beneficiaries while maintaining separate accounts for each. They can be an excellent option for smaller asset amounts or when an individual trustee is unavailable. In Michigan, pooled trusts can be established by the beneficiary, their parent, grandparent, legal guardian or a court.
- Third-party trusts: You can set up an additional trust your child can benefit from without requiring a payback.
Any of these trusts aim to pay for items and services to improve your child’s quality of life. They do not affect your child’s Medicaid or Supplemental Security Income eligibility.
Why do I need to set up an SNT for my child?
There is only so much that government benefits can do within their limited scope. Your child needs access to supplemental funds for health care services, therapy or counseling, adaptive equipment, and other needs to improve their quality of life. Having a special needs trust will give your child safety and protection so they can live to the best of their ability. Setting up the means for this safety net is possible with dependable and trustworthy lawyers who aim to carry out the creation and management of a special needs trust with dedication and care.