Making a special needs trust for an adult child

Most parents no longer have legal or financial responsibility for their children once their kids turn 18. Becoming a legal adult means that their children are now responsible for meeting their own needs.

However, not every child can be truly independent just because they reach the age of majority. Adult children with special needs may require ongoing financial support or daily support to take care of their own basic needs.

Children born with Down Syndrome or those who suffer a brain injury in a car crash may not yet be ready to live on their own. Thankfully, their parents can plan to help them by creating special needs trusts.

How a special needs trust works

A parent, guardian or other concerned loved one decides to create a trust for someone with special needs. They fund the trust with financial resources and other valuable property like real estate.

The special needs trust includes rules about the distribution of assets to the beneficiary with special needs. The trustee overseeing the trust manages the assets that fund the trust and determines when to distribute assets.

You could serve as trustee or name someone else to take over that role the trustee who will serve not only as the person protecting the financial interests of your child but also as a crucial resource for them as they handle the challenges of adult life.

Why use a trust instead of just providing support?

Creating a trust to help your child pay their rent or tuition may seem unnecessary. However, your gifts to them can trigger tax responsibility in some cases. They can also make your child ineligible for certain benefit programs, like Medicaid. By creating and funding a trust, you can connect your special needs adult child with financial support while still allowing them to receive government aid if they qualify.

A special needs trust can enhance someone’s standard of living while you are still alive and provide them with continued support and the guidance of a trustee after your death. Additionally, a special needs trust prevents your loved one from making mistakes with the resources you want to leave to them, reducing your risk of suffering financial abuse from manipulative people.

Recognizing the benefits of a special needs trust could help you decide if one is right for your family circumstances.