I recently met with a family that has two children with special needs. They asked me a very good question: Do I need two Special Needs Trusts? One for each child? Or, can we create one joint trust?
In a perfect world, each child would have his or her own Special Needs Trust. However, administering two trusts with its own assets could be very complex. Depending on the family’s situation, it could be possible to set up one Special Needs Trust with multiple beneficiaries in order to avoid unnecessary complications.
However, not every family can take advantage of one Special Needs Trust when there is more than one child with special needs. For example, if a child receives funds of his own from an inheritance or personal injury settlement, he must have his own First party Special Needs Trust to hold the assets and he can’t share the benefits with his siblings even if a sibling also has special needs. Also, if each disabled child’s needs are entirely different, it may make sense to have two Special Needs Trusts in place.
But, for the family I met with, and many others, one Special Needs Trust will work. In these cases, the trust must be a Third Party Special Needs Trust which is funded with money that doesn’t belong to the beneficiaries. The trustee of this type of trust must be familiar with the needs of both trust beneficiaries and should be capable of making decisions where there are competing needs. You can see that it would be important for the parents, or others who set up this type of Special Needs Trust, to outline their goals for the trust and their thoughts about how the trust funds should be allocated. A Memorandum of intent can be very useful for this purpose.
When you are dealing with Special Needs Trusts with more than one beneficiary, it is critical to make the right decision when choosing a trustee. Distributions from the trust for the benefit of one beneficiary could impact the benefits the other child receives so it is critical that the trustee knows the rules and intricacies of the law to avoid any issues.
It’s important that you speak to an experienced Special Needs Planning Attorney if you are wondering, “Do I need two special needs trusts,” to decide whether a single Special Needs Trust will work for both of your children with special needs. Please call our office at (571) 328-5795 before making this decision so that you don’t jeopardize one or both of your children’s eligibility for the critical government benefits they need.