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Special-needs child on SSI? Do you have a long-term plan?

Parents of children with special needs have a lot to think and worry about on a day-to-day basis, but their child's financial stability shouldn't have to be one of them. The Social Security Administration's Supplemental Security Income program, or SSI, does provide benefits to help with the costs of caring for children with disabilities, and those benefits can be extended into adulthood if the condition completely keeps the person from working at a self-sufficiency level.

A parent's advocacy and skill at obtaining appropriate benefits are often essential for children with disabilities even into their adulthood. Many parents work on the assumption they'll be with their children through most of their lives -- but what if you're not?

Chances are, many people love your child and would be more than happy to step up. Some may have the ability to provide cash help, to assign your child as a beneficiary of a life insurance policy, or to leave money to the child in will.

However, you need to be aware that if you or others transfer money or assets directly to the adult child, he or she may become ineligible for SSI. Under current law, unfortunately, SSI beneficiaries can't have more than $2,000 in total assets or they are disqualified. So, well-meaning friends and relatives could actually deprive adult children with disabilities of their most stable source of income by giving them money or paying their bills.

One way to avoid that is to set up what's called a special needs trust in which your child is the beneficiary and the trust funds are to be used exclusively for his or her care. Trusts are legally considered independent entities of their own, so its assets belong to the trust itself -- not to the beneficiary.

That means that when you, your relatives and others can put money into a special needs trust, the trustee's legal responsibility is to see that your child's best interests are protected. Additionally, you can make the trust -- not your child -- the beneficiary of your life insurance policy, which will dedicate the proceeds of the policy to your child's care without affecting his or her eligibility for SSI.

Whenever you consider a legal question, you should discuss it first with a qualified attorney. Many will provide you with advice and recommendations, along with a good sense of how much it would cost to draw up an effective special needs trust.

Source: Minuteman News Center, "Maximize your disabled child's government aid," Jason Alderman, March 20, 2013

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