Parents of children with special needs have all sorts of fears about what will happen to their offspring when they are no longer around to care for them. Some of these fears include their children losing money that they need for their daily care. This is one reason why Pennsylvania parents create special needs trusts for their children to help guard their children's money.
The main reason a special needs trust protects money is because the assets in the trust do not actually belong to the child. CNBC explains that money placed in an irrevocable special needs trust actually belongs to the trust itself. Payments from the trust are administered by a trustee. The trustee is in charge of the trust assets, investing them and providing care for the child as instructed.
A special needs trust can shield a child's assets from a number of scenarios that might otherwise deplete the child's money. Creditors, such as credit card companies, contractors, or banks might try to seize your child's assets to collect on outstanding debts. Similarly, a landlord might go after rent that your child has not paid. However, since assets in the trust are not owned by the child, creditors cannot touch them.
Finally, a special needs trust also allows parents to designate beneficiaries for the assets that remain in the trust should the special needs child pass away. Even though the special needs child may have incurred some debt at the time of his or her death, the assets in the trust will not be used to pay them. If the parents designate a brother or sister as beneficiaries, they will receive the money instead.
Due to the varying wishes of parents who have special needs children, the information in this article should not be interpreted as actionable legal advice. It is only intended for the educational benefit of the reader.