A special needs trust allows California parents to fund the needs of children who do not have the physical or mental capacities to care for themselves. Doing so can help you provide care for your children even after you pass away. If you believe a special needs trust is the right way to go, one of the most important decisions you can make is to determine how much money to place into the trust.
CNBC points out that the funding a special needs trust should receive will depend in part on the nature of the child’s disability. The greater the disability, the greater the funding may be needed to provide your child with whatever you believe is needed to handle everyday life. The level of health care your child requires will also be important since more intensive and continuous care will usually necessitate greater funding.
Special needs trusts can be funded with tens of thousands of dollars or even go as high as millions. However, anyone thinking of forming a special needs trust should know that it also costs money to set up and maintain the trust. If the trustee who oversees the trust is a family member, you will likely not have to pay your trustee anything. However, the CNBC article explains that a trustee that you hire, like a bank trust department, could charge a rate of 0.5 to 1.5 percent per year for services. So if you do form a trust, make sure you can financially maintain it.
Families who do not have substantial assets to fund a special needs trust can consider other options. In 2016, the federal government passed a law that allows for ABLE accounts to be created, which can take the function of a special needs trust with less complexity than a regular trust, provided the amount is up to $100,000. Some people opt for a pooled-asset trust that can pull together the assets of different beneficiaries into one portfolio.
Putting together a special needs trust will involve many questions, so it is best to answer them with expert guidance. Families can seek out the help of a financial planner to understand their finances, and an estate planning attorney can help explain laws concerning trust formation and other options that may be available. Keep in mind that this article is written to inform readers on estate planning and is not to be taken as legal advice.