You have a disabled child. Forefront in your mind is the need for his or her care now and in the future. What do you need to keep your loved one’s quality of life intact after you die?

A special needs trust or SNT is a trust designed to manage money and property for your child without jeopardizing government benefits. There are three types of special needs trusts. The first-party trust holds money received from inheritance or accident settlement. The third-party trust is for those who want to help a loved one with special needs. Nonprofit organizations use a pooled trust. More than likely you will use the third-party trust.

The Social Security Administration or SSA outlines the rules of who can make the trust. It also gives information about what your money can and cannot pay for.

Who can create the trust?

  • The disabled individual under age 65
  • Parent(s)
  • Grandparent(s)
  • Legal guardian
  • The court

What expenses does the special needs trust cover?

You must understand that under the rules of an SNT cash cannot go directly to your child. The trust allows for a chosen individual or trustee to pay bills and other essentials. A trust account is set up to distribute money. “Special needs” are:

  • Medical and dental expenses
  • Therapy or rehabilitation services
  • Education
  • Transportation and travel expenses
  • Recreation and entertainment
  • Insurance

There are certain expenses considered income by the government. The SSA calls this in-kind support and maintenance. They use this to calculate the amount of benefits your child receives. In-kind support and maintenance include:

  • Food
  • Mortgage
  • Rent
  • Gas
  • Electric
  • Water
  • Sewer

There are taxes involved with the special needs trust. The trustee handles the reporting of all income and deductions. The trust may get a bigger exemption if it meets the requirements of a qualified disability trust.

Choosing a person to take responsibility for your child is not an easy task. The potential trustee must understand how the special needs trust works and how it can affect government benefits.