The danger of leaving money to your child with special needs

If you have a child who has a disability or special needs, you may fear he or she may never find gainful employment. Because your son or daughter is dynamic in other ways, this may not bother you much now. Still, after your death, your child’s unemployability may make it difficult or downright impossible to pay for living expenses.

While leaving cash or other assets to your child with special needs is certainly noble, your generosity may disqualify him or her for public benefits. That is, your gift may push your child over the income threshold for means-tested programs, like Supplemental Security Income.

Setting up a trust

Setting up a trust may be the right solution for you and your family. With a special needs trust, you place money in a trust for your child’s benefit without gifting funds directly to him or her. The funds in the trust are not likely to count as assets for purposes of qualifying for needs-based government benefits.

Your child may use disbursements from the trust to cover supplemental expenses while still receiving government help for housing, utilities, food and basic medical care.

Naming a trustee

There is another obvious advantage to setting up a special needs trust. When you form the trust, you choose a qualified and caring trustee to manage it. This person ensures your child does not inadvertently become ineligible for government help. He or she may also find doctors, social workers, counselors and others to provide the services your son or daughter needs to thrive after your death.

Ultimately, before leaving money to your son or daughter, it is advisable to consider both the risks and the alternatives.