When you are a parent of a child with a severe disability, financially preparing for his or her long-term future is imperative. You want to do everything in your power today, to make sure your child is able to live comfortably into adulthood. Setting up a special needs trust is a central step to making sure your child will have what they need. Although your son or daughter may be young, waiting to put assets and money in their trust could be a costly mistake. Here are some reasons why you need to start funding your child’s special needs trust now:
Estate Planning and Your Child’s Special Needs Trust
Even if your child is young and you have every intention of caring for his or her needs for many years to come, you have to be prepared if something should happen to you. If you were to pass away without a will, your child would inherit directly from your estate. This could present a problem if he or she is dependent on income-sensitive benefits such as Medi-Cal (California Medicaid) and SSI (Social Security Income). This inheritance would be counted as income and end up disqualifying them from receiving their benefits. The same could be true to life insurance proceeds. The good news is that with careful estate planning, you can direct your child’s inheritance and any life insurance proceeds into his or her special needs trust without it being considered income.
Incapacity and Your Child’s Special Needs Trust
Additionally, if you were to become incapacitated and unable to provide for your child’s needs, you would probably not be able to contribute to his or her trust. An accident or illness could occur at any time. If you have not funded your child’s special needs trust, you could be leaving them in an uncertain position. Without other funding sources in place, your child’s trust will not be able to perform its intended function.
Contributions and Your Child’s Special Needs Trust
Making contributions to your child’s special needs trust over time can help build up a considerable sum. Your child’s loved ones can make small gifts to the trust throughout his or her lifetime that can grow with interests. For example, if your son’s grandparents gifted him $50 for 10 special occasions per year for 20 years, he would have $10,000 If an aunt made a routine birthday gift of $100, and an uncle gave $500, that would be $12,000. If other relatives were to make contributions as well, the trust funds could grow to a meaningful amount over time.
Cost of Living Increases and Your Child’s Special Needs Trust
If your child is dependent on government benefits, he or she will not be able to have much personal income. However, these program benefits rarely keep pace with the costs of living and almost never leave the recipient with extra fund. Having a special needs trusts can help pay for extra expenses that make his or her life more comfortable. By starting to fund this critical resource now, you can help ensure that your child will have what he or she needs to enjoy leisure activities, travel, and to pay for other costs that he or she might not be able to otherwise afford.
How to Set Up a Trust Fund for Your Special Needs Child
The first step in setting up a trust fund for your special needs child is to contact a special needs planning attorney. Your counsel can help you identify funding sources and develop a plan for your child’s needs. Once you have consulted with a California special needs planning attorney, you can work together to get the correct documents drafted to direct inheritances, life insurance proceeds, and other resources into the trust for your child’s benefit.
You can’t predict the future, but you can prepare for it by making sure your child’s trust is properly funded. At the Law Offices of Alice A. Salvo, we have the California estate and special needs trust planning experience you need to help you prepare for your child’s future. Contact us today to schedule an appointment.