Planning for the future of a special needs child is difficult even in the best family circumstances. Two married parents will often struggle to create a robust estate plan that provides adequate support for a special needs child in the future.
Unlike most children, special needs children may remain dependent on their parents for their entire adult life. They may require extensive, ongoing medical care that can prove quite expensive. Additionally, they may not have the physical or mental capacity to live independently. That can make divorcing more complex.
Developing a plan for the needs of your child after you pass on is complicated. When you can't trust the other parent because of a divorce, it is even more complex. Thankfully, a special needs trust is the perfect tool for providing for a special needs child after their parents divorce.
Special needs trusts protect your assets for your child
Typically, if a parent passes away and leaves assets to their child, the child will inherit the full amount at once. If the child is a minor at the time of inheritance, their legal guardian or other parent will usually assume control over those assets. You didn't work hard to disentangle your financial life from that of your former spouse only to hand all of your assets back in the event that you die unexpectedly.
Instead, you want those assets to remain protected for the benefit of your child. Creating a special needs trust can ensure that anything you leave behind goes directly for the care of your child. Even if you name your ex as trustee, they cannot use those funds for purposes outside of the terms in the trust.
Ideally, you can name a third-party as trustee or split the authority and responsibilities of trustee between your child's other parent and a party that you trust to protect and follow your wishes.
A special needs trust helps your child remain eligible for benefits
Having a parent inappropriately use funds is only one concern about a standard inheritance for a special needs child. There are also the ongoing medical costs to consider.
If your child relies is on Medicaid for coverage, a lump-sum inheritance could wind up seized and used to repay previous expenses. They could also disqualify your child from receiving benefits for a significant time in the future. A trust with carefully planned disbursements helps ensure that your child can continue to qualify for state benefits as necessary.
Going through divorce is difficult, but it is the perfect time to revisit your estate plan and last will. If you haven't already created a special needs trust, now is the time to consider doing so. If you have already created a trust, you may want to adjust it to ensure that there is adequate oversight of your ex and protection of the assets for your child.