When you live in Massachusetts and have a child with special needs, you may need to take additional steps during estate planning to make sure your actions do not impact your child’s eligibility for government assistance. Individuals with disabilities need to undergo means testing to qualify for many types of government assistance. Leaving your child money or assets in a traditional manner may make him or her ineligible.
Many people facing similar circumstances choose to get around the means-testing issue by placing assets for their children into special needs trusts. There are two main types of special needs trusts: the first-party special needs trust and the third-party special needs trust. A third-party special needs trust offers the following two advantages.
It preserves benefit eligibility
Once you place assets into a third-party special needs trust, you must name a trustee to oversee the trust distributions once you die. The assets in the trust are technically the property of the trustee, rather than your child with special needs. Thus, those assets do not factor in during means-testing to determine benefits eligibility.
It gives you control over what happens later
Another major benefit of the third-party special needs trust is that you maintain control over what happens to any remaining assets in the trust when the beneficiary dies. You may decide to give the remaining assets to other children or charity, for example. You may do so as opposed to having to reimburse Medicaid, as you would need to do with a first-party special needs trust.
Typically, you, the parent, establish the special needs trust. However, the grandparent, a sibling of the individual with special needs or anyone else who is not a beneficiary may also do so.