A special needs trust can be an important inclusion in your estate plan if you have a child or other dependent family member with special needs. The goal of a special needs trust is to provide financial resources for someone who needs extra support while also limiting the risk that they would misuse those resources.
It can be difficult to know when the time is right to sit down and create a trust for a family member with special needs. After all, you might hope that their abilities and independent living skills will improve as they grow older.
When is the right moment to set aside assets for your loved one with special needs?
Take action as soon as you know they need support
Some people will know from the first days after a child’s birth that they will need long-term support in the future. Other specific forms of special needs, like autism, may only become obvious later in a child’s life. In other scenarios, it is an injury, like a brain injury from a car crash, that makes a special needs trust necessary.
Once you know that your child will need a structured inheritance or financial support as they get older, you can start planning to provide that to them. Early planning is almost always preferable to delayed planning. You can always revise a trust or fund it with more assets later, but you can’t create paperwork if something unexpected has happened to you.
What do you need to create a special needs trust?
One reason people delay the creation of a special needs trust is that they assume they don’t yet have the resources necessary to properly fund a trust for their child. Thankfully, you don’t need to have liquid capital for all of your child’s future expenses when you initially plan the trust.
You have the option of creating transfer on death designations for your accounts or setting the trust as the beneficiary for your life insurance policy. Even if you can’t set aside assets for a lifetime of support for your child right now, you can make arrangements to fund their trust with future income or even property from your estate.
Learning the basics about special needs trusts can help you protect a vulnerable loved one and give yourself peace of mind.