A concern for parents or grandparents of children with disabilities is how to assist with the child’s financial future. One way to assist is to set up a Third Party Special Needs Trust.
Any funds left for a disabled child, whether from an estate or the proceeds of a life insurance policy, should be held in trust for the child’s benefit. Leaving money directly to anyone with a disability jeopardizes his public benefits. Many people with disabilities cannot manage funds, especially large amounts. Some families disinherit disabled children, relying on their siblings to care for them. This approach has potential problems including the sibling being sued, getting divorced, disagreeing with other siblings regarding responsibilities and taking the funds for the sibling’s own use. It can also cause tax problems for the sibling. The best approach is a Third Party Special Needs Trust for the disabled child.
If a Third Party Special Needs Trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest they may like to leave to that child through the trust.
Contact an estate planning law firm for further information.