If you have an adult child who has a disability, you want to be able to provide for him in the best way possible, in terms of his physical, mental and financial well-being. As parents, your biggest worry may be how to ensure he is well cared for after you are gone.

A special needs trust may be the solution, and you can establish it within the framework of your estate plan.

How the trust works

A special needs trust sets up a relationship between the donor who funds the trust, the beneficiary who receives the benefits and the trustee who is in charge of administering the trust. It is basically a legal document that creates additional funding which does not conflict with any government assistance your child may be able to receive, such as Medicaid or Supplemental Security Income. In order to remain eligible for such programs, your child cannot maintain over $2,000 in the bank at a time. The federal assistance programs would also stop if you were to bequeath a lump sum inheritance to him. However, the government does not count money that is set aside in a special needs trust.

A funding idea

While money may be no object if you are a well-to-do donor, you may also be on a budget. If so, you might consider adding funds to the special needs trust through a last-to-die insurance policy, also known as survivorship life insurance. You and your spouse simply decide on a set amount of life insurance and pay a monthly premium. Once the second partner passes away, the policy pays directly into the trust; the funds do not have to go through probate.

Other options

A family law attorney will tell you that you have various options when planning how best to arrange for the ongoing care of your special needs adult child. If you have other children, you will likely want to name them as beneficiaries, too, and you can do this in conjunction with the special needs trust.