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Special Needs Trusts for Children with Down Syndrome

March 2, 2021 by Ronald "Chip" Morrison

Every year, about 6,000 babies with Down syndrome are born in the United States. Over their lifetimes, many of these children will contend with serious medical conditions including heart defects, gastrointestinal problems, visual or hearing impairment, dementia, and early-onset Alzheimer’s disease. As a result, the costs associated with Down syndrome can be astronomical and many of those with the condition receive public benefits, such as Medicaid or Supplemental Security Income (SSI). 

All parents want their children to be happy and to enjoy long-term financial stability, and parents whose children have Down syndrome often believe the best way to accomplish this is to leave money to their children using a Will, a life insurance policy, or a retirement account. However, leaving money directly to the child can disqualify him or her from receiving much-needed benefits. For example, under SSI rules, a recipient is limited to $2,000 in assets. If a recipient has property valued more than this amount, his or her benefits are suspended until those assets are “spent down” below the $2,000 threshold. 

This means that the unintended consequence of an inheritance or even a big gift from grandma could result in a loss of valuable benefits. 

What is the best way to plan for long-term financial security for your child? One solution is to establish a Special Needs Trust. 

Under the terms of a Special Needs Trust, a Trustee manages trust property to ensure that it will remain a long-term source of funds for the child. The Trustee has the discretion to distribute trust assets to (or on behalf of) the child, as long as he or she follows strict rules that forbid the use of Special Needs Trusts for any of the services covered by government benefits. In a nutshell, Medicaid and SSI benefits continue to cover the basics, while trust assets can be used to provide a child with the “extras” that enhance the quality of life. 

Often, parents opt for a Special Needs Trust that goes into effect when they die, but this isn’t the only choice. You can also establish a trust that takes effect during your lifetime. There are a number of advantages to establishing such a trust. For instance: 

  • Substantial gifts to your child from grandparents and other family members can be paid into the trust without fear that they’ll interrupt your child’s benefits.
  • Funds you have earmarked for your child’s care can be transferred to the trust. After the transfer, they’ll be treated as separate assets – not yours and not your child’s. This way, the funds will be out of reach of your creditors and safe in the event of divorce. The Trustee you’ve selected will manage them on behalf of your child, so you can rest assured the funds will be put to their best possible use. 

For more information about Special Needs Trusts, talk to an experienced estate planning attorney. Morrison Law Group, PLC can help you sort through all your options and establish a comprehensive plan that meets the needs of your child and your entire family. 

Credit: The American Academy of Estate Planning Attorneys 

About Our Law Firm 

Ronald “Chip” Morrison, Jr. is a Board-Certified Specialist in Estate Planning and Administration by the Louisiana Board of Legal Specialization and a member of the American Academy of Estate Planning Attorneys. He has been engaged in Louisiana trusts and estate law for the last 16 years and has experience in both simple and complex estate matters. Our firm serves clients throughout southern Louisiana. For more information or to attend an upcoming seminar, please call our office at (504) 831-2348 or contact us through our website.

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Ronald
Ronald "Chip" Morrison
Ronald “Chip” Morrison, Jr. is a Board Certified Estate Planning Law Specialist as certified by the Louisiana Board of Legal Specialization. He is admitted to practice before all State courts in Louisiana. He is also admitted to practice before the United States District Court for the Eastern and Middle District of Louisiana.
Ronald
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About Ronald "Chip" Morrison

Ronald “Chip” Morrison, Jr. is a Board Certified Estate Planning Law Specialist as certified by the Louisiana Board of Legal Specialization. He is admitted to practice before all State courts in Louisiana. He is also admitted to practice before the United States District Court for the Eastern and Middle District of Louisiana.

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