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Why California parents should include a special needs trust

Estate planning is a wonderful opportunity for a young family to provide for future security. One of the more distressful concerns is a child with special needs. Parents realize the child will likely need long-term care. How can they ensure the best future for their special needs child?

Perhaps naming a guardian is a good idea--although there have been several news stories of guardians who have taken financial advantage of special needs children and adults. It may not be wise to place so much financial power into the hands of one person.

How does a special needs trust protect a child?

Often, special needs children receive large settlements from medical facilities or providers whose negligence or medical malpractice resulted in life-long injuries to a child. Parents have been careful to bank the money in a savings plan. Medical bills are costly, and above all, they wish to protect and guarantee their child's access to present and future care.

A special needs trust has several advantages

First, guardianship does not protect the child from losing state and federal benefits. A special needs trust maintains the child's eligibility for federal and state benefits. For example, a special needs trust protects Medi-Cal, Social Security Disability, and supplements from state and federal.

Next, an appointed trustee manages the assets of the trust. The advantage is that the family can choose an appropriate person or institution. The family can also appoint a successor trustee should the original trustee become incapacitated or wishes to resign as trustee. Parents can set up any terms they desire in the special needs trust. Some trusts provide for education, housing modifications, medical care and equipment, enrichment programs, vacations, equine therapy, and other activities designed to benefit the child over a lifetime.

Funds in the trust will need oversight for investment growth purposes, tax payments, distributions, caregiver payments, payment of medical invoices, extra treatment protocols or education opportunities. Taking on the role of a trustee is a serious responsibility. Rather than leave the task to a court to provide an unknown professional trustee, the family may prefer to appoint someone who is familiar with trust management and has an overall view of their entire trust plan and financial portfolio. While it may be tempting to appoint a family member, trust management requires investment skills, familiarity with taxes, financial planning, and knowledge of the complex benefits system available to the child. Parents can also set up the special needs trust with very specific requirements and instructions for their child's benefit. It is a good feeling to know that a child's needs are well-managed and there is an assurance of quality care for the future.

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