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Special Needs Trusts

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Special Needs Trusts


If you are raising a child with a physical, developmental, or other disability, we understand the obstacles and difficulties you may face on a day-to-day basis. Between running to and from specialist’s appointments, IEP meetings, occupational and speech therapy and caring for your child’s basic needs, among other things, there is little time to take care of the tasks of today, let alone plan for tomorrow. As you know, there are legal and financial concerns that must be considered when planning for your loved one’s future such as:

  • Who would raise your child if something unexpected happened to you and/or your spouse?
  • How can you ensure enough money is left behind should your child require a lifetime of care?
  • What happens when your child turns 18? How can you continue to make those medical and financial decisions their behalf?
  • How can you ensure your child is not taken advantage of financially or emotionally if you are no longer there to protect them?

While each legal situation is as unique as your child, we wrote this guide as a basic overview for busy parents of children with disabilities who simply need a roadmap for the future and simple action steps that tell them what to do and where to start.

Letter of Intent

The documentation that you create with us will be quite detailed and will take an incredible amount into consideration, but it will likely not cover every possible concern or wish you may have for your child’s future care. For that purpose, many parents work with us to create a Letter of Intent. The Letter of Intent is along the lines of a personal letter, rather than being a more formal legal document. It is used to supplement the special needs plan in order to provide additional information in the following ways:

  • Overview – A summary of the child’s life to date and your aspirations for the future
  • Family history – Information and “favorite memories” relating to parents, grandparents, siblings, and friends, as well as the child
  • Medical care – Detailed description of disabilities, with a medical history, medications, and current healthcare providers
  • Benefits – List of programs such as Medicaid and Supplemental Security Income (SSI), in which the child is enrolled, agency contacts, case numbers, documentation requirements
  • Daily routines – Include activities he loves or hates, and chores he typically performs
  • Diet – Likes and dislikes, allergies, interactions with medication
  • Behavior management – Programs in place, level of success, unsuccessful past efforts
  • Residential – Current living arrangements and changes which may be necessary in your absence
  • Education – Programs to date and preferences for the future
  • Social life – Activities he enjoys, including vacations
  • Career – Types of work he enjoys/might enjoy and supports required
  • Religion – Role this plays in a child’s life
  • End-of-life – List preferences and arrangements that have been made

The letter is typically addressed to the people who will be caring for your child once you are unable to fulfill that role. When the time comes, your attorney will share the Letter of Intent with the child’s caregivers, as well as with the trustee. They can use the letter to help interpret your desires and to help follow through on the wishes you have for your child.

We at Planning Across the Spectrum can help find the right attorney for our team who will address all of your concerns and special considerations with your loved one’s unique needs in mind.

Special Needs Trusts

Special needs trusts can be set up and funded in numerous ways. The special needs trust can be either revocable or irrevocable and can spring to life upon your passing or be set up during your life.

If you are the only one to contribute, then a trust that springs to life upon your death may be the best choice.

If other family members, such as grandparents, aunts or uncles will also be contributing to the trust, then it makes the most sense to create a trust that is effective now. If you are sure that you will be the only contributors, then you might want to consider a revocable trust, as it can be changed throughout your lifetime to reflect the choices you want to make over the course of time.

One of the biggest considerations that need to be made is who will be the trustee. This is the person, or sometimes an organization, who will administer the trust that has been created to care for your loved one. Careful thought needs to go into choosing this person, as he or she will have a significant impact on the life of the person cared for by the trust. The trustee will also have access to funds and will make a lot of important decisions.

We can help you to define the role of this person through your legal documents, but you still want to choose someone who is trustworthy and has your loved one’s best interests at heart. He or she should also be very familiar with the specific needs of the person they will be responsible for, which could range from medical concerns to favorite foods and hobbies. Additionally, you want to choose someone who has the ability to create and execute a reasonable budget. One option is to name both a family member and a professional or trust company as co-trustees.

Funding a Special Needs Trust

Knowing where the funding or financial resources will come from to fund a special needs trust can add an extra layer of concern. Medical concerns and housing options are certainly just the tip of the iceberg when it comes to planning for the rest of your child’s life!

Chances are, you have been dealing with these expenses all along and are concerned that there will be nothing left to provide for your loved one.

Of course, if you have a valuable estate to leave behind, much of this can be used to fund the trust. Whether you dictate that real estate be sold upon your death to benefit your child or you have created some sort of savings program that will meet his or her needs, then you’re doing really well. Your financial planner will help you direct these funds to the correct place.

However, for what is probably the majority of the population, leaving such a sizeable estate behind to care for a special needs child is just not in the cards. So, what do you do in a situation like this? One common answer is to purchase a life insurance policy that pays out directly to the special needs trust.

We can also advise you on how to use qualified retirement accounts, i.e. IRAs and 401(k) plans, to fund a special needs trust.

Perhaps surprisingly, there are policies that are set up to pay off only when the second parent passes away, and these can be quite inexpensive. They are often referred to as “second-to-die” policies.

Another option for funding the trust is to ask others to contribute. Tax incentives allow for considerable breaks on money that is given in the form of gifts annually.

For those looking for such an incentive, the special needs trust can be a worthwhile recipient for an annual contribution. In these cases, it is recommended that you set up the special needs trust as an irrevocable trust.

In order to make it easy for others to contribute, the trust should be created during your lifetime rather than upon your death.

How Much Money Should Be In the Trust

Determining the proper amount to fund a special needs trust is something that you will likely want an experienced financial planner to help with. in mind that because there is no real way to predict how costs will change, it is a good idea to re-evaluate your numbers from time to time. When determining how much you will need to fund your trust, a few categories and expenses you may want to consider include:

  • Housing
  • Medical care
  • Care assistance
  • Education
  • Employment
  • Replacement for assets
  • Special equipment
  • Transportation
  • Recreation

A financial planner with experience funding special needs trusts will have a comprehensive list of considerations and will work with you to determine appropriate numbers. With the right guidance, you can rest easy knowing your child will be financially cared for in your absence.

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Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Planning Across the Spectrum are separate entities from LPL Financial




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