If you have a son, daughter or family member who requires your assistance, you may already be wondering what will happen to them after you pass away. If your child has mental health challenges, one possibility is to start a Special Needs trust.
While those with disabilities may receive assistance such as Supplemental Security Income, any extra money in a trust can benefit them in the long term. People with disabilities often need extra money beyond what the government can provide to support a higher quality of life.
In a high net-worth family, setting aside a million dollars for a Special Needs trust is a good idea. Additionally, these trusts can be managed by a professional trustee or money management service that can support the adult child after a parent passes away. You can also choose to put the trust in the hands of your attorney.
What can you do if you don’t have that kind of money to put away? There’s another option called a pooled trust. These trusts have several beneficiaries and multiple sources of funding. The assets are pooled together, so the trust can maximize its returns. Pooling the money also helps reduce the cost of management. Not all pooled trusts are the same, but here’s an example about how it would work.
The trust would take an initial deposit, for example, $20,000, which is handled by professional investors and managers. The manager can provide funds to the disabled person throughout his or her lifetime when necessary for paying for things like out-of-pocket medical costs, trips out of state or even to participate in community activities. The trust has so many pooled assets that the money grows quickly due to interest. Additionally, each person is protected, because there are caps on spending in each category.
This is one option you might consider, but there are others. Your attorney has more information about trust administration and how to best support a loved one once you’re gone.
Source: Jewish Journal, “Special needs trusts: A financial lifeline for people with disabilities,” Michelle K. Wolf, Oct. 14, 2016