A special needs trust can help protect benefits and provide long-term financial security for a child with disabilities. Here’s what families should know about getting started.

Motherhood is a promise. This truth came to me one afternoon while my children napped. I peeked into their rooms to check on them. Lightweight blankets twisted between their legs, two-year-old twins Marcus and Nathan slept peacefully in their cribs. Jonathan, 3, and Kelene, 4, slept in the next room, their soft, even breathing filling the quiet.

As they rested, oblivious of their vulnerability, the weight of parenthood sat me down on my kitchen chair. These four young lives were mine and my husband’s to grow, nourish and protect into adulthood. This was the unwritten covenant we needed to fulfill. I prayed every move we made on their behalf was worthy of their trust.

Upholding this covenant became harder as my family shifted. By 1999, I was a single mother of four, and Marcus had been diagnosed with autism and developmental delays. Worried about his present and his future, I consumed every piece of information I could.

Who would take care of him when I no longer could? One answer to this longer-term worry was something I learned about while attending a weekly family workshop at Cal State San Bernardino. During the two-hour workshop, the speaker shared the importance of creating a special needs trust, how to establish one and the consequences of not having one. Though the speaker’s face has faded from memory, his warning not to leave a child’s future to fate is as clear now as it was then.

But I delayed.

I delayed for reasons that made sense at the time. In my early 40s, the present took precedence over the future: doctors’ visits, federal Supplemental Security Income (SSI) paperwork, childcare, last-minute Walmart runs for school projects, keeping the lights on. When I did think about the trust, the details overwhelmed me. Who would fund it? How could I pay a lawyer? Who could I trust as trustee?

Protecting benefits, protecting the future

Twenty years later, the future is here. Kelly Piacenti, a chartered special needs consultant and head of SpecialCare at MassMutual, warns: “Life can change quickly, and no parent wants to leave their child’s future to chance.”

According to the California Department of Health Care Services, a special needs trust is a legal tool that “allows a disabled person to maintain eligibility for public assistance benefits…” This matters because federal SSI rules limit a person with a disability to no more than $2,000 in countable assets. An irrevocable third-party special needs trust (SNT) lets a parent name the trust as the beneficiary for assets instead of the child, so those assets do not count against SSI eligibility. A third-party trust also is not subject to Medi-Cal estate recovery, meaning remaining trust funds can pass to other heirs, such as siblings. Securing the trust for Marcus lets me keep the covenant I made so many years ago.

David Terk, executive director of Serenitas Special Needs Planning in Tarzana, explains that “anywhere your child with special needs is listed, they’ll get money directly.” Naming the trust rather than the child as the beneficiary on life insurance and retirement accounts is essential; otherwise, a parent can undo their own protection.

Terk’s advice made me review my own designees. He also recommends a stand-alone third-party irrevocable trust rather than one embedded in a will. A standalone trust is established immediately, avoids probate delays and can receive funds during or after the parent’s lifetime.

Choosing who will carry the responsibility

Choosing a trustee is the most emotionally heavy part of the process. Who can we trust to carry out our covenant to our child after we are gone?

Terk advises parents to consider close family or trusted friends first. Preparing that trustee for what they will face is what lowers the emotional weight of the role. High Rise Financial advisor Jerry Khachoyan stresses that “preparing the trustee financially to take over care and financial duties changes the dynamics dramatically. It gives the potential trustee the confidence that they won’t be doing this alone.”

Khachoyan further explains that a guardian and a trustee can be two different people: one handles day-to-day care, the other manages finances. The split creates informal checks and balances. Terk also points to co-trustees or a professional team as another option, an approach that balances the responsibility and gives the trustee expert support.

To provide additional support, the Special Needs Alliance recommends a letter of intent describing the beneficiary’s daily needs, routines and preferences. It is a map that costs nothing to create.

Start with one small step

How to fund the trust has also been a major concern. Terk explains that parents do not need to put their own money into the trust while they are alive. “Those assets are there for you to use during your lifetime,” he says.

Instead, a parent’s assets typically flow into the trust at their death, through retirement accounts, permanent life insurance or a family trust. But grandparents and other relatives can make gifts directly to the trust at any time, which is one reason the Academy of Special Needs Planners recommends creating a special needs trust well before a child turns 18. Setting it up early gives relatives a protected place to send their gifts and gives assets time to grow.

Meanwhile, the California’s CalABLE program lets families begin saving during a parent’s lifetime, offering investment portfolios where money can grow tax-free without affecting benefits eligibility. I missed the recommended 18-year-old milestone, but I am still here to act. The good news is the trust protects your child from the moment it exists.

Even so, I wondered whether I could afford to create one. Attorney fees for establishing a special needs trust can range between $2,000 and $5,000, with lower-cost nonprofit options for families with more modest budgets. Khachoyan reassures parents that “a consultation does not mean one has to immediately start the process of a trust.”

For parents like me who become overwhelmed by the process, we can start small.

• Check the beneficiary designations on your life insurance and retirement accounts.
• Draft a letter of intent describing your child’s needs and preferences.
• Book a free consultation with a special-needs planner.
• Build the plan from there.

Today, I have more information than I did 20 years ago. The workshop in San Bernardino no longer haunts me. I am equipped to keep the promise I made to Marcus in that kitchen long ago. As Piacenti of MassMutual’s SpecialCare program states, “The most important first step is simply to start the conversation.”

Terk’s words resonate: “Hope is not a strategy. Action is.”

Darlene Kriesel is a Southern California-based freelance writer and educator. Her work explores the intersection of education, disability and family, helping families navigate life’s unexpected transitions with clarity, compassion and hope.