Missouri residents who have a child with some type of disability that will require special care for the life of that child will want to pay close attention to their options when making an estate plan. As explained by Kiplinger, a special needs trust is one of the vehicles that may provide good options for families in this situation.
A special needs trust allows assets to be put into the trust for the benefit of the special needs child. One of the biggest benefits of this type of trust versus simply saving the money in a bank account is that it cannot be used against the child in the determination of their benefits for Medicaid or Supplemental Security Income. For both of these programs, the child’s assets would be reviewed. However, if there is a special needs trust, the assets in the trust do not become part of this evaluation.
Parents may also want to establish permanent, not term, life insurance policies and name the trust as the beneficiary of those policies.
Fidelity Investments adds that there are multiple types of special needs trusts, including first- and third-party trusts. In the former, the trust is funded with assets from the child directly. In the latter, the trust is funded with assets from other parties. The flow of money upon the death of the child differs with these types of special needs trusts with remaining funds in a first-party trust going to Medicaid. For third-party trusts, remaining assets may be distributed per the wishes of the trust.