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How a special needs trust protects your child with a disability

When your child has special needs, you may need to make additional efforts to make sure your son or daughter has enough to get by on well into adulthood. Many Indiana parents who have children with disabilities help plan for their futures by using special needs trusts.  

How does the special needs trust work, and what options might you have when it comes to creating one? 

The special needs trust and its protections

The special needs trust gives you an avenue through which to leave your child with a disability assets without your doing so possibly jeopardizing your child’s public assistance eligibility. If your child is a recipient of certain health care benefits or income assistance programs, he or she may have to undergo means testing to qualify for them. Assets in a special needs trust are not subject to means-testing. This means that your child may access them after your death while remaining eligible for public assistance.  

Types of special needs trusts

There are two main types of special needs trusts. The first is the first-party special needs trust, and the other, the third-party special needs trust. Unless your child with a disability has an entitlement to substantial assets from an inheritance or settlement, you may want to create a third-party special needs trust. The third-party special needs trust contains assets belonging to a third party, rather than your son or daughter. You may decide to fund it using a life insurance policy or other means your child otherwise has no interest in.  

There are other important differences between the two types of special needs trusts. Another important distinction involves what happens to any remaining assets when the beneficiary dies.