Instead of Creating a Special Needs Trust, Can I Just Leave Money for a Sibling to Look After My Special Needs Child?
A special needs trust is for the benefit of a disabled child or adult who are unable to care for themselves financially and who have insufficient assets to pay for medical care or for the necessities of life. This kind of trust can provide for these needs while keeping your disabled child qualified for Medicare and Social Security Disability (SSI) benefits.
Instead of setting up a special needs trust, what if you decide to just pay funds to a sibling to look after your disabled child? By doing so, there is no guarantee that the funds you available to your sibling will all go towards your disabled child’s welfare.
Loss of Government Benefits
The law is very strict regarding eligibility for governmental benefits including Medicare and SSI. If your special needs child as an adult holds more than $2000 in assets, he or she will cease to qualify for SSI benefits. It also disqualifies your child for Medicaid and food stamps.
Establish a Special Needs Trust
A special needs trust is easy to create and will enable your child to receive the benefits that you provide and enjoy the governmental assistance he or she needs to live a quality life. A special needs trust is created pursuant to the Omnibus Budge and Reconciliation Act (OBRA-93), which includes:
- Language that the trust is intended to provide your child with supplemental care in addition to that provided by the government.
- Naming a trustee, which can be a family member or a financial professional or financial institution.
- Funding the trust through insurance proceeds, personal injury settlements, inheritances or any other type of asset.
Trusting a sibling to take care of your special needs child is an awesome responsibility that your sibling may initially embrace but may come later to regret or resent. Also, it is easy for your sibling to justify diverting funds for his or her own use or to consider it as an out-of-pocket expense incurred while caring for your disabled child.
Also, if you leave your child an inheritance and no trust is created, it can disqualify your disabled child from receiving governmental benefits instead of providing an extra benefit.