6,500,000 kids receive special education*. As many as 10 percent of children under age 14 have some degree of special need including any physical, cognitive, or medical disability or illness. The parents of these children are certainly under an increased level of emotional and financial stress. They have concerns about getting the best care for their child in the present as well as providing for their future. For your clients who are the parents of a special needs child, you can give them an invaluable gift -
The gift of the peace of mind
Introduce the value of establishing a special needs trust so they can gain comfort in knowing their loved ones will be cared for.
There are two primary types of special needs trusts; first party and third party. First party trusts are established to hold assets that belong to the special needs individual such as accident settlements or inheritance. Third party trusts hold assets that belong to others such as a parent or grandparent who want to help the person with special needs. For the purposes of this blog I will limit the discussion to third party trusts.
Typical attributes of a third party special needs trust are:
- Parent or other loved one establishes trust and appoints a trustee who is responsible for spending the money on the behalf of the beneficiary who is the special needs individual.
- A properly drafted trust provides additional funds to support the beneficiary without impacting the benefits available from Medicaid and SSI.
- The trust can remain unfunded but use life insurance or estate assets to fund the trust upon death of the parent/caregiver. Life insurance planning ensures that enough assets will be available to properly care for the special needs individual. Survivorship Life in combination with term coverage is an efficient funding mechanism and particularly valuable for younger parents as inexpensive protection against premature death especially in a common accident.
- If structured properly, gifts to the trust during the donor's lifetime can reduce their taxable estate.
- The trustee cannot disburse trust assets directly to beneficiary. However, the trustee can pay for a wide range of good and services that can dramatically improve quality of life. Some examples include: personal care attendants, education, recreation, vehicles and home furnishings.
- Trust assets are not subject to creditors or judgements against the beneficiary.
- The trust terminates with the death of the beneficiary with the remaining funds being part of the beneficiary's estate.
The best gifts are not always something that can be purchased in a store or on a laptop. For your clients who are parents of special needs children, give them the gift of peace of mind. We can assist in the process and help your client use the tools and products available to ensure their loved one receives the best of care.
*For 2013-14 school year, per the National Center for Education Statistics.