Do I need to set up a special needs trust?

Special needs trusts are designed to allow families to create a detailed plan for their child’s future, while also making sure the child remains eligible for social services as they get older. An individual can't have more than $2,000 in assets and needs to remain under a certain income level to remain eligible for public benefits SSI. If you die and you've left your child a 401(k) or your home, then that jeopardizes their eligibility for services. If, however, you've put your assets into a special needs trust, then those assets won't count against your child's eligibility for government programs.

The real advantage of a special needs trust is that it all but asks parents to create a very comprehensive plan for their child when they will no longer be their child’s primary caretaker(s). The purpose of a special needs trust is to allow a person with disabilities to hold assets without affecting their eligibility for social services, but it is much more than that. When you create a special needs trust, you appoint a trustee or trustees to administer the trust when you’re no longer able; you nominate a guardian for your child; and you write a detailed letter of intent describing how you want your child to be cared for when you’re gone. These decisions are ultimately what make creating a special needs trust worthwhile, but they’re not easy.

Note that not all families need a special needs trust; for families with few assets, an ABLE account may be sufficient. For more information, see our article ABLE Accounts and Special Needs Trusts.