Estate Planning for a Special Needs Child
What Parents Need To Know
While it is an obvious concern for all parents, estate planning for a special needs child who may be dependent on you for their lifetime comes with unique considerations. If your child has special needs, you must understand exactly what’s necessary to provide for the emotional, physical, and financial requirements in the event of your own eventual death or potential incapacity.
When creating your estate plan including a special needs child, there are two major considerations to focus on:
- Who would care for your special needs child if and when you cannot (also known as guardianship)?
- How will your child’s financial needs be met when you are not there?
Read on to get clarification on your options – from custody to special needs trusts.
Naming Legal Guardians for a Lifetime of Care
The first and most critical step in ensuring the future well-being of your child with special needs is to name both short and long-term legal guardians. Guardians take custody and care of your child in the event of your death or incapacity. If your child is never expected to be fully capable of independently caring for him or herself, your parenting responsibilities will continue on long after your child reaches adulthood.
This lifetime responsibility can feel overwhelming to assign. However, naming legal guardians and knowing your child will be cared for in the way you want and by the people you want, will create an immense sense of relief.
You will likely want guidance on selecting the individual(s) best suited to serve as legal guardian(s). And creating the proper instructions for that person(s) to properly care for your special needs child requires thoughtful planning. It is wise to consult with your estate planning attorney about key considerations for both of these steps.
Providing for Your Financial Future: Special Needs Trusts
Beyond naming legal guardians for your special needs child, you must also consider the financial resources need to allow your child to live a happy life in the manner you desire. This is where things can get tricky.
Here’s the (seeming) catch – you want to leave your child enough money to afford the care and support they need to live a comfortable life. But if you leave money directly to a person with special needs, you risk disqualifying that individual from much-needed government benefits such as Medicaid and Supplemental Social Security Income (SSI).
The government does allow assets to be held in a “special needs trust” to provide supplemental financial resources for physically, mentally, or developmentally disabled children. This trust provides for your child without affecting his or her eligibility for public healthcare and income assistance benefits. Keep in mind that the rules for such trusts are complicated and can vary greatly between states. For this reason, we highly recommend consulting with an experienced estate planning lawyer. An attorney can help you create a comprehensive special needs trust that’s properly structured and appropriate for your child’s specific situation.

Setting Up a Special Needs Trust
Funds from a special needs trust cannot be distributed directly to your child. Instead, funds must be disbursed to a third party who’s responsible for managing the trust. Given this, when you initially set up the trust, you will likely be both the Grantor (trust creator) and Trustee (the person responsible for managing the trust). Your child is the trust’s Beneficiary.
Then you must name the person responsible for administering the trust’s funds upon your death or incapacity as the Successor Trustee. To avoid conflicts of interest, overburdening the legal guardian with too much responsibility, and providing a system of checks and balances, it may be a wise decision to name someone other than your child’s legal guardian as a Trustee.
As the parent, you serve as the Trustee until you die or become incapacitated. At that time, the Successor Trustee takes over. Each person who serves as Trustee is legally required to follow the trust’s terms and use its funds and property for the benefit of your special needs child.
Additionally, you should name multiple Successor Trustees. This can be a person, trust company, bank, or another professional fiduciary to serve as backups in case something happens to prevent the individual you’ve named as primary Trustee from serving.
There are two ways to set up a special needs trust.
Option 1:
In the first option, your lawyer builds it into your revocable living trust, and it will arise upon your death. From there, assets that are held in your living trust will be used to fund your child’s special needs trust.
Option 2:
In the other option, your lawyer can set up a special needs trust that acts as a vehicle for receiving and holding assets for your child right now. This option makes sense if you have grandparents or other relatives who want to give your special needs child gifts sooner rather than later.
Finally, it is important to ensure that the trust will have sufficient funds to last throughout the life of your child. One common method to provide funding is for you (or another loved one) to name the special needs trust as the beneficiary of your life insurance policy. Another way is for family members and friends to make donations or gifts to the trust or include it as a beneficiary in their will.
The Trustee’s Role
Once the special needs trust is funded, it’s the Trustee’s job to use the trust funds to support your child without jeopardizing eligibility for government benefits. To ensure this is handled properly, the Trustee must have a thorough understanding of how eligibility for such benefits works and stay current with the ever-changing laws. The Trustee is also required to pay the beneficiary’s taxes, keep detailed records, invest trust property, and stay current with the beneficiary’s needs.
Given this immense responsibility, it’s often best to name a legal or financial professional familiar with the complexities of the law as Trustee or Co-Trustee. This ensures the proper handling of the trust to not jeopardize your child’s eligibility for government benefits.
A Trusted Source For Special Needs Estate Planning
If you need to create or update your estate plan for a special needs child, a trusted attorney is an important resource. You are invited to meet with me to get trusted guidance and support in understanding special needs trusts and other estate planning vehicles for your child. I can offer options uniquely designed to meet your family’s needs.