Can Others Contribute to My Child's Special Needs Trust?

One key benefit of creating a special needs trust as soon as possible is having time for your extended family and friends to make gifts to the trust or include the trust in their estate planning.

How Does a Special Needs Trust Work?

Special needs trusts are usually irrevocable trusts designed to supplement your loved one's basic support programs, like Medicaid and SSI. You must choose a trust type that suits your family's needs best, then fund it with assets, including property, investments, or life insurance. And of course, gifts can be received by all your family and friends.

Once these items are transferred to the trust, the trust is the owner, and your trustee manages the funds. Because the trustee controls the assets, they won't affect your loved one's public benefits eligibility. Your trustee distributes payment for comforts and luxuries that meager public assistance funds don't cover, like education, recreation, counseling, vacations, equipment, training, and more.

Funding a Trust with Life Insurance

A trust can be the beneficiary of a life insurance policy. The death benefit proceeds go straight to the trust when the insured person dies. Because the trust has been set up for the benefit of the special needs person, the money pays for that person’s care and support throughout their life. 

Life insurance provides immediate funds to your loved ones if you die unexpectedly, and ensures they can meet their basic needs without exhausting their savings or going into debt. Having sufficient cash flow is critical to maintaining essential services such as therapies, housing, and medical care that should never be interrupted.

Purchasing an insurance policy makes the most sense when you are younger and healthier and insurance rates are low. There are different types of life insurance, including term and whole life. Learn more about funding a special needs trust with insurance, as well as second-to-die or survivor policies. 

Setting Up Your Trust

When setting up a special needs trust to protect public benefits and allow contributions from friends and family, the trust should be irrevocable, not revocable. It is important to know the difference. Learn more about leaving money to a child with special needs with first-party, third-party, or pooled trust.

A special needs planning attorney in your area can help determine which trust type is right for your situation based on how the trust is funded and affordability.