Parents of disabled children in Los Angeles face unique challenges that may not end when the kids become adults. Their special needs may make it necessary for their parents to continue their role as primary caretakers after they turn 18. But parents cannot take care of their children forever, which is where special needs trusts come in.
These are trusts set up to provide financial resources for a child whose physicial or mental condition prevents him or her from supporting him- or herself as an adult. They can provide peace of mind for parents, who will be able to know that their children are being taken care of after they pass on.
There are three main types of special needs trusts. One is called a self-settled or first-party special needs trust. This type needs to be funded by property and assets belonging to the beneficiary, such as a legal judgment. Since many special needs children have no significant assets, there is also a third-party, or testamentary, trust. This more common trust allows parents to fund it with their own assets. Also, a third-party trust does not need to be funded immediately and can be funded through the parents’ estate plan.
The third type is called a pooled trust. It allows multiple parties to fund the trust and is designed for parents or guardians with limited assets to collect from others to build up the trust. Pooled trusts are overseen by a nonprofit organization.
Just as important as picking the right sort of special needs trust is selecting a trustee to administrate it. Some observers prefer that a relative be named trustee, while others say a professional is better suited. All of these decisions depend largely on each family’s circumstances.
Source: The Fiscal Times, “Estate Planning Guide for a Special Needs Child,” Sonya Stinson, July 10, 2013