A Primer on the Special Needs Trust Option for Divorcing Parents of Special Needs Children

Divorcing parents of a special needs child are often focused on then-existing issues presented by the dissolution process: current child custody and support arrangements. However, while parents are likely mindful of the ongoing financial obligations of a special needs child, or adult dependent, emotional and financial complications of a divorce can cloud that foresight. An option divorcing parents in this situation should consider are the benefits of a special needs trust for the ongoing support of their child. By creating a special needs trust, or a trust created for the support of those who cannot manage their own money, parents can appoint someone, including themselves, to ensure certain the funds in trust are specifically devoted to the supplemental support of their child for the indefinite future.

There are several benefits to creating a special needs trust. Most importantly, funds received by the child from trust do not interfere with the child’s ability to receive public assistance. The amount of government public assistance provided is affected by the child having any sort of management or control over money. Support provided by a trust is managed by a trustee, or someone other than the beneficiary; therefore the child can still continue to receive public benefits even in light of receiving financial assistance from the trust. Additionally, money placed in trust is safe from creditors of both parents (trustors) and the beneficiary child.

It is important for parents to choose the trustee wisely, if they choose to appoint someone other than themselves. While a trustee must act in accordance with the terms of the trust and as a fiduciary to the beneficiary, they generally have discretion to interpret those terms. This becomes incredibly important if the trustee and beneficiary survive the parents, as it is important to ensure the parents’ original intent is carried out once they are gone. Typically, parents vest the trustee with authority to provide for needs such as groceries, rent, and medical necessities, but can be further detailed depending on the needs of the child. Parents have the option to appoint a friend, family member, or other trusted person to manage the trust, or they can hire an independent fiduciary or attorney. Roughly every two years the trustee and/or attorney must provide an accounting of their fees to the court, which protects against potential abuse of discretion by the trustee.

When considering the creation of a Special Needs Trust, it is extremely important to consult with an attorney who specializes in special needs planning to make sure the interests of the child are fully addressed in the divorce process.

Author Jenny E. Bain is an attorney with Forester Purcell Inc. Family Law Attorneys. Update 2/1/16 – Forester Purcell Inc. is now Forester Purcell Stowell PC. Jenny can be reached at jenny@foresterpurcell.com or 916 293 4000. This information is general in nature and should not be construed as legal advice.

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