Special Needs Trust

• Children with disabilities often rely on their parents for support well after they have reached adulthood. Often, these children receive Medicaid and other government benefits that would be jeopardized if the child were the direct recipient of a large sum of money via inheritance or otherwise. One way to provide for your disabled child while maintaining his government benefits is to establish a special needs trust. Under this arrangement, you place funds in trust for your child and appoint a trustee to manage the funds in compliance with strict government rules. The trustee cannot distribute money directly to your child, but he can use trust funds to enrich your child’s lifestyle and supplement the benefits your child receives.
  
  

Spendthrift Trust

• The spendthrift trust is a common option for parents whose adult children have difficulty managing their own finances due to addictions or other issues. A spendthrift trust gives a trustee the discretion to meet an adult child’s needs by distributing funds to the child or by dealing directly with service providers to pay a child’s bills. With a spendthrift trust, a child cannot access funds whenever he wishes. Instead, the trustee follows the terms of the trust and uses his best judgment in deciding when and how to distribute funds.
  
  

Lifetime Trust

• Even if your child has excellent money management skills, a lifetime trust could benefit him. With a lifetime trust, you can give your adult child a great deal of control over the trust assets, even naming the child as trustee. At the same time, a properly drafted lifetime trust can protect an adult child’s finances from myriad outside forces. As long as the funds remain in a trust with the appropriate provisions, they can be protected from the child’s creditors or from the child’s spouse during a divorce. You can also use a lifetime trust to leave an inheritance to your child while minimizing estate tax.
  
  

Considerations

• A trust that meets your goals for your adult child must be properly planned and carefully drafted. Consult an attorney for help establishing a trust.