man laughing with son who has special needs

5 Benefits of Setting Up a Special Needs Trust

Caring for a loved one with special needs comes with unique challenges, and one of them is how to secure their financial future. Even when you have the best intentions, leaving money to them in your will can actually cause financial problems for the special needs person. Setting up a Special Needs Trust (SNT), however, provides both financial security and peace of mind. Here’s why it’s a good idea to set up a special needs trust for your loved one. 

Five Reasons Why You Should Set Up a Special Needs Trust 

1: To Preserve Eligibility for Government Benefits

Government benefits like Supplemental Security Income (SSI) and Medicaid have strict income and asset limits. When you leave money to a beneficiary through your will or as a financial gift, the funds become part of that person’s income. If your gift causes them to exceed the income threshold for government assistance, then they will lose their benefits.

Placing the funds in a Special Needs Trust instead allows you to support them financially without jeopardizing their access to crucial government assistance programs. However, the funds in an SNT can not be used to pay for living expenses like groceries, utilities, housing, or food. Since government benefits are supposed to cover these costs, using SNT funds to pay for living expenses could affect the disabled individual’s eligibility for government assistance.   

2: To Enhance Quality of Life

Although a Special Needs Trust cannot pay for living expenses, it does allow for supplemental support that enriches the lives of individuals with disabilities. Funds from the trust can be used to cover a wide range of expenses, including:

  • Medical expenses, such as in-home nursing care and prescription medications
  • Education, including tuition, books, supplies, etc.
  • Vacation and travel expenses
  • Recreation and entertainment such as club memberships and event tickets
  • Insurance premiums
  • Vehicle purchase and maintenance
  • Electronics like computers, smartphones, and gaming consoles
  • Other expenses that allow them to live a more fulfilling and enriched life

3: Professional Management

Part of setting up a Special Needs Trust involves appointing a responsible trustee. This person will manage the assets in the trust according to the instructions you leave. They will also be able to make financial decisions on behalf of your beneficiary. Professional trust management will ensure that the funds are used wisely and in the best interests of the beneficiary, and will prevent financial mismanagement. 

4: Protection Against Exploitation

Individuals with special needs are often more vulnerable to financial exploitation by others. Setting up a Special Needs Trust provides an added layer of protection by entrusting the management of assets to a responsible trustee. This minimizes the risk of financial abuse and ensures that the individual’s resources are used exclusively for their own benefit. 

5: Peace of Mind

A Special Needs Trust also offers reassurance to families that want to safeguard their loved one’s financial security and quality of life. Whether you want to leave your life insurance policy to your special needs child or make a gift to a grandchild who has a disability, you’ll have peace of mind knowing that their financial future is secure. Plus, an SNT empowers your beneficiary to lead a more fulfilling life without having to worry about money. 

Do You Need Help Setting Up a Special Needs Trust?

Establishing a Special Needs Trust is a powerful and compassionate way to protect the wellbeing of individuals with disabilities. A well-crafted SNT is an invaluable tool for promoting financial stability and peace of mind. At Phelps LaClair, we can help you set up a Special Needs Trust, and we’ll customize it to fit the unique needs of its beneficiary. Give us a call at 480-892-2488 today to schedule a free consultation. 


Images used under creative commons license – commercial use (2/1/2024). Photo by Nathan Anderson on Unsplash 

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