Child Support Payments Made into a Trust

Under special circumstances, a parent getting child support payments might utilize that help to subsidize a trust for the child. Frequently, there are explicit variables that will influence the type of trust, how much money the mother or father might put into the trust from the payments and how the child will receive the funds.

The trust will be designed to meet the child’s needs for education, health care and support as they change during their lifetime. The trust could cover living expenses so the child does not have to rely on public subsidies that may not meet their needs. In some states, all of a parent’s support payments are held in trust while, in others, they are paid to the parent. A trust can also be set up with a combination of income and gift funds until the child reaches age 18. The goal is to have money available for them when they are no longer dependent on their parents’ income, but still young enough that they can take care of themselves. If you want your child to have a trust fund that can help them maintain their lifestyle comfortably, take care to provide an inheritance by purchasing a life insurance policy and naming them as the beneficiary.

Special Needs Trusts

A Special Needs Trust (SNT) is a trust that is established for the benefit of someone who has a disability or has special needs. There are two types of trusts: a “first-party” trust and a “third-party” trust. A first-party trust is set up by the person with disabilities or other special needs, often in conjunction with parents, friends, or others close to that person. A third-party trust is set up by someone else on behalf of the person with disabilities.

The SNT can be established by parents, grandparents, other relatives extended family members. The trust may be funded by the settlor during their lifetime or through their will after they die. It can also be funded by the person with disabilities themselves and/or their family members.

This type of trust is often used to help pay for things like education, housing, transportation and medical care when these types of expenses are not covered by government programs or insurance.

Special Circumstances for Special Needs Trusts

If the child is mentally impaired or disabled the money from government-based benefits normally requires the need to deposit support payments into an irrevocable SNT trust. This ensures that the acquired monies are not counted as income. Some parents may have concerns about how taking care of their disabled child will affect their own retirement savings or ability to qualify for government benefits like Medicaid. It is best to check with your attorney for your particular state for laws pertaining to SNTs.

Special Needs Trusts Requires Legal Assistance

Setting up a SNT without a lawyer can be a daunting task because of the legal complexities. It is best to seek the help an experienced estate planning lawyer.