The Importance of Strategic Funding for Special Needs Trusts
Understanding the Child's Needs and Projected Expenses
Evaluating Parental Ability to Fund the Trust
Parents should keep careful records of their expenses for their child now and project those expenses into the future. Consider what expenses may not be covered by government programs. You should also evaluate the child’s overall health, medical conditions that may require special treatment and the possibility that government resources may not be available. This will provide a clear picture of the child’s needs and how much money will be needed for the SNT.
Ultimately, how much money can be put into the SNT, depends upon the parent’s ability to fund it.
Funding Options for a Special Needs Trust
Asset Mix of Retirement and Non-Retirement Assets
Utilizing Whole or Permanent Life Insurance
Tax Implications and Efficient Asset Management
Tax Implications of Asset Distribution
Maximizing Tax Efficiency in Irrevocable Trusts
Revocable SNTs become irrevocable upon the death of both parents. Irrevocable trusts are tax-paying entities and are taxed at a higher rate. Investing assets must be managed very carefully in an irrevocable trust to achieve maximum tax efficiency.
It takes a village to plan for the secure future of a person with a disability. An experienced elder law attorney will work closely with the parents, their financial advisor, and their accountant.
Reference: Advisor Perspectives (April 29, 2020) “Funding Strategies for Special Needs Trusts”
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