March 26, 2012
Parents and caregivers of those with special needs well understand how important it is to always think ahead in order to prepare the way for their loved one. Special needs planning is an area of estate planning that these families must consider in order to ensure that their loved one is cared for once the parent or other caregiver can no longer do so. Working with an experienced special needs lawyer in Sacramento can offer great insight and creative ideas when it comes to setting up the best ongoing care.
Knowing where the funding will come from for a special needs trust can add an extra layer of concern. Medical concerns and housing options are certainly just the tip of the iceberg when it comes to planning for the rest of your child’s life! Chances are, you have been dealing with these expenses all along and are concerned that there will be nothing left to provide for your loved one.
That’s why it makes sense to consider the available options when determining how to fund a special needs trust.
How Can I Fund a Special Needs Trust?
Of course, if you have a valuable estate to leave behind, much of this can be used to fund the trust. Whether you dictate that real estate be sold upon your death to benefit your child or you have created some sort of savings program that will meet his or her needs, then you’re doing really well. Your Sacramento special needs lawyer will help you direct these funds to the correct place.
For what is probably the majority of the population, however, leaving such a sizeable estate behind to care for a special needs child is just not in the cards. So, what do you do in a situation like this? One common answer is to purchase a life insurance policy that pays out directly to the special needs trust. Perhaps surprisingly, there are policies that are set up to pay off only when the second parent passes away; and these can be quite inexpensive. They are often referred to as “second-to-die” policies.
Another option for funding the trust is to ask others to contribute. Tax incentives allow for considerable breaks on money that is given in the form of gifts annually. For those looking for such an incentive, the special needs trust can be a worthwhile recipient for an annual contribution. In these cases, it is recommended that you set up the special needs trust as an irrevocable trust. In order to make it easy for others to contribute, the trust should be created during your lifetime rather than upon your death.
How Much Money Should Be In the Trust?
Determining the proper amount to fund a special needs trust is something that you will likely want an experienced Sacramento lawyer to help with. There are a lot of considerations to keep in mind when it comes to trying to anticipate the future needs of your child. Because there is no real way to predict how costs will change, it is a good idea to re-evaluate your numbers from time to time.
A few of the categories you’ll need to consider include:
A lawyer with experience funding special needs trusts will have a comprehensive list of considerations and will work with you to determine appropriate numbers.
If you have questions or you’re ready to get started setting up a special needs trust for your child, give our Fair Oaks trusts and estates law firm a call at (916) 534-7790 and ask to schedule a free Peace of Mind Planning Session with the mention of this article ($750 value).