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Special needs trusts provide protection after child turns 18

People set up trusts for a variety of reasons depending on their situation. Some people set up trusts to distribute assets upon death. However, trust planning is not only important when preparing for one's passing. For instance, special needs planning is important for families with a special needs child to address before their child even becomes an adult.

Regardless of a child's special needs, when he or she turns 18, his or her parents will no longer have the ability to make legal decisions on behalf of their child. So, establishing a plan for managing the child's finances and guardianship before his or her 18th birthday is critical. If these decisions are not made before then, parents will no longer be able to make arrangements for their child's future and instead government agencies, the state, or courts may make these important personal decisions.

For some special needs children, this may not be an issue, but depending on the child's abilities, he or she may need parents or guardians to set up arrangements for his or her adult life. One family whose daughter is autistic learned the significance of careful special needs planning only several months before their daughter's 18th birthday. The parents had made plans for their daughter that included a well-stocked trust that she would receive in full shortly after turning 18.

However, remaining eligible for Medicaid was critical for this teenager. Her parents had not realized that she would lose eligibility if she had assets over $2,000, and the trust they set up would surpass this limit. While her parents had set aside money for her, many programs available for special needs individuals like their daughter are only accessible to those on Medicaid. Essentially, if she had received the trust in full, she would have been excluded from valuable adult special needs services in her community.

This family learned the details of special needs planning in time. Setting up a special needs trust for their daughter enables them to provide money for her to live off of while retaining her eligibility for Medicaid.

Source: The Wall Street Journal, "Keeping autistic child on Medicaid," Jacob Levenson, Nov. 5, 2012

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