If you have a child with autism, down syndrome or another condition, you may worry about his or her future. After all, not only may your child have unique needs, but he or she may also have trouble meeting them. Fortunately, your son or daughter may qualify for Supplemental Security Income, Medicaid or other needs-based government assistance. 

If your estate plan includes giving money directly to your child, you may inadvertently interfere with eligibility for public programs. That is, because many programs require recipients to have limited income, a financial gift may reduce or eliminate assistance. For many parents, setting up a special needs trust is the solution. 

Special needs trusts 

A special needs trust holds funds for the benefit of an individual. Because the trust does not transfer asset ownership to the beneficiary, though, it usually does not compromise eligibility for public benefits. 

Funding options 

Special needs trusts have three essential players: the donor, the beneficiary and the trustee. While you may decide to donate your own assets to your child’s special needs trust, you have some other options. For example, you may use proceeds from a lawsuit or insurance settlement to fund the trust. 

The special needs trustee 

If you have decided to establish a special needs trust, you must pick a responsible trustee to manage it. The individual you choose should have a basic understanding of needs-based programs. He or she should also be able to oversee disbursements in a timely manner. 

Acceptable disbursements 

Disbursements from special needs trusts must only cover special needs. If proceeds pay for everyday expenses, such as shelter, food or utilities, your child’s eligibility for needs-based programs may be in jeopardy. Therefore, the trustee should only approve disbursements for special expenses that improve your child’s quality of life. 

Not only may a special needs trust be a good way to provide for your child, but it may also be a smart estate planning tool for you. Regardless, if you are looking for some peace of mind, forming a special needs trust for your son or daughter may be the right approach.