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Do you need a special needs trust fund for your autistic child?

by | Aug 12, 2020 | Finances, Long-term planning

Mother and son sitting in front of rocks. Do you need a special needs trust for your autistic child?

Let’s face it, as parents of children with autism and ADHD, we worry about our kids’ futures. Autism hits families hard financially. We want to ensure they are cared for if we are not around. Some of our high-functioning kids will live independently and do the whole “adulting” thing in their own way. For others who are lower on the spectrum, we want to be sure they have the means as the adult. So when do you need a special needs trust fund for your autistic child?

This is something I’ve been thinking about more and more as our son J gets older. He is high functioning, and I think he will be able to live independently. Yet, given the statistics around unemployment for those on the spectrum, I am concerned he may need more help. Researching special needs trust funds is something I’ve needed to do for a long time. Therefore, I am happy to share what I’ve found with you.

Types of special needs trust funds

Family making dinner. Do you need a special needs trust fund for your autistic child?

There are three types of special needs trust funds. Those include:

  • First Party or Self Special Needs Trust Fund – This type of fund is created by assets owned by the person who has autism, and they are the beneficiary. These could be from an inheritance or another event such as a personal injury settlement. The fund must be created when the person is under 65 years of age and is considered irrevocable or cannot be changed. When the person dies, payment to Medicaid is required before distribution to anyone else.
  • Third Party Special Needs Trust Fund – This fund is created by assets owned by someone else other than the person with a disability, such as a parent, grandparent or other person. This can be established either during the creator’s lifetime or as a part of their will. It is managed by someone other than your child, and it’s not considered their asset. That means they remain eligible for government assistance that requires them to have limited assets. This type of fund does not have to pay Medicaid upon the beneficiary’s death. Instead, the remaining funds can be distributed to whomever the creator designates.
  • Pooled Special Needs Trust Fund – This type of fund is usually run by a nonprofit organization that acts as the trustee. For this fund, the organization “pools” assets from many different people into a master trust, and then it manages sub-trusts for the various beneficiaries. This type of trust can be helpful for those who do not have many assets to set up a trust individually for their child. This trust type also requires Medicaid to be paid first upon the beneficiary’s death.

Benefits of special needs trusts

Mother and daughter at a table. Do you need a special needs trust fund for your autistic child?

While you are able to care for your child, you are able to help provide and pay for the extras your child needs. That includes education programs, therapies not covered by Medicaid, or other assistance. But after you are gone, your child may not be able to fund those on their own if they cannot live independently and is relying on government and other assistance.

The benefits of a special needs trust for your autistic child include:

  • Protecting your child’s financial assets from others who may misuse them.
  • Providing additional assets available to them to pay for therapies and other living expenses not covered by government assistance. Most government programs require participants to have no more than about $2,000 in assets to qualify. That isn’t much. While those programs will cover the basic costs of living such as housing subsidies, food and medical care, it doesn’t cover anything else.
  • Enjoying the peace of mind knowing that your child will have additional money available for transportation, self-care, education, entertainment, caregivers and more that will provide them a higher quality of life.
  • Knowing that you are not putting an extra burden on your other children or family members to provide for your child once you are no longer able to do so.
  • Protecting the assets of your child by placing them within the trust.

Money needed to fund the trust

So where does the money come from? It could be assets that you already own that you place into your funds. You could form it through your estate upon your passing. Many times, people use life insurance policy payouts after they pass as the assets for the trust.

How you start a special needs trust fund

Boy standing next to a tree. Do you need a special needs trust fund for your autistic child?

To establish a special needs trust fund for an autistic child, you need to work with a lawyer in your area that specializes in these types of funds. The lawyer will walk you through the process such as writing a letter of intent for your child and setting up the trust fund itself.

To find an attorney near you, check out the Special Needs Alliance’s “Find an Attorney” directory.

Have you already set up a special needs trust fund for your autistic child? If so, what advice do you have for others? Leave a comment to share with and encourage other parents and caregivers who are on this journey.