A sizeable gift or inheritance may temporarily improve your disabled child’s life, but it can also jeopardize vital federal and Ohio state benefits like Social Security income and Medicaid. A special needs trust can help you plan for the future without sacrificing critical long-term government support.
Before making your estate plan, it is helpful to understand the basic features of different types of special needs trusts.
You can create a third-party trust to hold limitless assets from various sources to supplement your child’s government benefits. The holdings can pass on to other family members in the future, making this trust a versatile estate planning tool. However, you must name a trustee to allocate the assets, which your child may not own.
Beneficiaries may own the assets in first-party trusts, which often come from inheritances or injury settlements. In Ohio, you may create a first-party trust for your minor child, or your mentally competent adult child under age 65 can establish one. In either scenario, the funds may apply only toward the original grantee’s expenses, which government programs do not cover. The remaining balances after that person’s death must reimburse Medicaid.
A pooled trust combines the assets in many first or third-party trusts for investments that meet a broad range of needs. A nonprofit organization serves as the trustee, thus minimizing administrative work and costs. Any assets remaining in a first-party pooled fund after a grantee’s death must reimburse Medicaid; otherwise, nonprofits usually keep final account balances to benefit others with special needs.
A special needs trust can secure your child’s future, but the relevant federal and Ohio state laws are complex. Still, these financial tools can be indispensable for providing your child with the resources to meet any future eventuality.