As a Colorado parent, you may prioritize leaving a legacy behind for your loved ones, but you may face additional estate-planning considerations as the parent of a special needs child. Providing for your disabled child after your death involves a careful balance, because if you leave too much behind to him or her, it may jeopardize continued eligibility for government assistance.
According to Forbes, a special needs trust gives you and other parents of children with disabilities a means through which to leave your children assets without hurting eligibility for other benefits, such as Supplemental Security Income or Medicaid.
When you place assets into a special needs trust that you want to go toward the future care of your child, you shield those assets from creditor claims. Credit card companies, landlords and other creditors may not touch the assets inside the special needs trust under any circumstance.
Special needs trust types
Several different types of special needs trusts exist. Many people choose to set aside assets for their child with disabilities in either a first-party, or self-settled, trust, or a third-party special needs trust. The self-settled trust might be appropriate for your child if he or she receives funds as part of a settlement or has claims to an inheritance. It may also suit your needs if your child had property or assets of his or her own before becoming disabled.
The third-party special needs trust is another form to consider. With this type of trust, you or someone other than your disabled child funds it. The third-party special needs trust gives you a chance to set aside funds for your child, and it also allows you to make distributions to other family members when certain conditions exist.