EPISODE 11 – When to establish a special needs trust for your child – June 1, 2022

Does timing really matter about establishing a special needs trust for a child who is a minor? Listen to Bart share stories about establishing special needs trusts.


Greetings from our Middle Tennessee studio…welcome to today’s Vista Points podcast, “Choose Your Path”, where the Vista Points’ staff are committed to improving the quality of life for people living with a disability. 

I’m Bart, your podcast host. My role is to walk with you on this journey of discovering and using special needs trusts. We’ve recently begun digging deeper into topics addressing special needs trusts for children living with a disability.

A child might have been born and diagnosed with a disability or the disability might have been discovered later in life. No matter the case, the child is living his or her life with the disability. I’m sure every parent wants to help ensure a safe, comfortable future for his or her child. Fortunately, a special needs trust ensures that a child (the beneficiary) can live a good quality of life while maintaining government benefits and a financially predictable future.

You may know parents who are so busy dealing with today’s needs that being able to think or plan for the future is a stretch. I understand. I feel for the parents and their child who’s living with a disability. My guess is they are probably overwhelmed with today’s chaos and unable to think past the present. They are doing the best they can today with what they have and they’re unaware of the benefits of long-term financial planning for their child living with a disability. 

I want you to know, that you, the parent, can make a huge difference in your child’s life by establishing a third party supplemental special needs trust. Today is about learning, asking questions, researching answers and putting plans into place. Tomorrow allows your loved one, your child, to live comfortably without worry, stress or concern even when you cannot personally care for him or her and when you are gone.

Does it still sound too good to be true? Let me assure you, a special needs trust lives up to expectations! It provides financially predictable future. It ensures its beneficiary maintains government benefits which cover much of the day to day expenses. The third party special needs trust allows your child to receive thoughtful monetary gifts such as an inheritance without endangering current government benefits. Throughout this podcast you hear me use the words special needs trust and supplemental needs trust interchangeably. Both types of trusts are special needs trusts. The supplemental needs trust refers specifically to the third party trust. Now, I don’t want these terms to confuse you. If you have a question about the type of trusts a person living with a disability can have, please visit the Vista Points website at www.vistapoints.org. O-R-G.

A special needs trust is a legal document. It is well-defined, has structure, allows for expenditures and accepts monetary gifts while establishing, enabling its beneficiary, who is the loved one living with a disability, to continue benefits without worry. It is best handled by a team of professionals who collaborate to benefit the beneficiary. The team does not need to be large but it does need to specialize in Special Needs Trusts. Allow me to focus on the professional side for a moment. There are many people who work on behalf of the beneficiary. They work as a team. One team member is the attorney, whose focus is on disability, estate planning and/or family law, and the other is the special needs professional, the trustee, who guides and has more experience with special needs trusts than anyone else on the team, a hand to hold, and the wisdom to share. Last but certainly not least is the beneficiary along with his or her parents or legal guardian.

Establishing a special needs trust for your child, grandchild, nephew/niece or even for the neighborhood kid is different than a special needs trust established for someone who has their own money and is living with a disability. Out of the three types of special needs trusts, this one is called a third party supplemental needs trust. Its rules and regulations are different than a pooled special needs trust or a first party special needs trust. All of the funds placed in a 3rd party trust are from relatives, friends, neighbors, etc. This is to say that the funds are gifts and not income received by the beneficiary. Asking family members and friends to donate money to the 3rd party trust on the beneficiary’s birthday, Christmas or whenever can build a nice nest egg for the beneficiary’s future, even when some or all of the donors have passed.

The funds are still only to be used by the beneficiary (the child in this case). The money in the third party supplemental needs trust has an extra benefit. It is not subject to a Medicaid pay back. This means that when the beneficiary dies, the money remaining in the trust after all the expenses are paid can be distributed to whomever is listed in the agreement that established the trust.

Many people believe they can handle all the complexities related to managing a special needs trust for their loved one. Yet what happens when life gets in the way? I’ll tell you a short story about a family who thought everything was gonna work out well but it didn’t. Now, there’s a good ending, so hang in there with me until the end.

John and Mary had a daughter with Down’s Syndrome. The doctors told them their daughter, Jessica, would not live to be 40 years old due to her illness. These parents were wonderful with Jessica. They also had two other children after Jessica was born, Randall and Monica. As Jessica neared 40, they realized the doctors were wrong. Jessica was going to live many, many more years. John and Mary met with an estate planning attorney. They had a third party supplemental trust put into place with Randall and Monica co-managing the trust for Jessica. All went well for a few years. Then John and Mary were tragically killed in a plane crash. All the duties of caring for Jessica fell on Randall and Monica. This was all well and good, but both Randall and Monica had their own lives, their own families, their own jobs, their own hobbies. You get the picture. Randall and Monica tried diligently to take care of Jessica, having her stay a couple days at one of their houses and then at the other. Whoever was taking care of Jessica had the say so in how the special needs trust money was spent. This became a problem. Sometimes Monica would tell Randall that he was overspending on Jessica and that would, that spending the money wouldn’t last. Randall would tell Monica that she wasn’t saving all the receipts from purchases made with the trust money. Monica would get angry. Randall would get angry. The communication between the siblings went downhill quickly. Jessica’s care suffered. She became agitated and whiny. Randall and Monica were at their wit’s end. They didn’t know what to do. This was when Randall and Monica made an appointment and met with their parents’ estate planning attorney. The attorney suggested having a successor trustee take over the management of the trust money. Randall and Monica would choose one of them to be the primary advocate for Jessica. The trustee would manage the third party supplemental needs trust for Jessica. Randall and Monica would still make suggestions and help the new trustee. This took a tremendous burden off the two of them. Soon, Jessica was back to her old self, full of life and always smiling. Life returned to normal. The three adult children were able to live harmoniously once again.

The timing of setting up the special needs trust for a child is unique. Parents and grandparents establish third party special needs trusts for their children or grandchildren at various times in their loved ones life and at various times in their own lives. What’s unique about establishing a third party supplemental trust is that no matter when it’s established, it will bring financial benefit to the loved one and help this person live a good quality of life.

You may know someone like this next gentleman I’m going to tell you about. Frances was 85 when he gained the custody of his granddaughter Elizabeth. She was 24 and living with Cerebral Palsy. Immediately Frances established a third party supplemental needs trust for Elizabeth. He used the money he’d saved from his retirement checks to fund her trust. Frances hired a professional trustee company to manage the trust for him. He didn’t want the burden of managing the trust himself. He also wanted the professionals to handle the trust because he didn’t know how long he would be in good enough shape to take care of Elizabeth. 

Why, you may be asking, did Frances do this? Frances knew that being 85 years old, he would not have many more years with his granddaughter. He wanted to make sure to make her as comfortable financially for when he’s not able to care for her, she would still be able to live a good quality of life.

On the other hand, let me tell you another story about Susan. She had recently recovered from breast cancer. Susan and her husband did not have children. Susan did have a niece with autism. She wanted to establish a third party supplemental needs trust for the niece. This would help the family be able to live more comfortably knowing that the money she put into the trust would be used solely for the benefit of the niece. This would free up money the family had been using to care for the niece. The family struggled each month to make ends meet. They would then be able to use that money for themselves. Susan decided to use a professional trustee (to) manage the trust. She served as advocate. This relieved Susan of some of the burden of keeping meticulous records of how the trust money was spent and how the money was invested. Susan could also contact the trust company at any time to obtain the current balance of the trust, request copies and obtain complete financial statements.

It’s important to set up a special needs trust for your minor child living with a disability. Its timing may not seem important since you and your spouse are both healthy, working and have a routine in place. But consider the unforeseen. 

Joshua always talked about setting up a third party special needs trust for his son Elijah who had a mental illness called schizophrenia. He’d tell his family this type of trust could benefit Elijah in many ways, especially after he was gone. And unfortunately time ticked by. And before anyone realized the special needs trust for Elijah was never established, Joshua died of a heart attack. He had no will, and Elijah had no special needs trust. Joshua’s estate paid for the outstanding bills. That’s about all he had. Elijah was put in a mental institution to live out the remainder of his life. His extended family visited, but those visits became fewer and farther between. Was this what Joshua wanted for Elijah? A life in a mental institution? After all, Elijah was only 37 when he was placed in the facility. Could Joshua’s special needs trust that he talked about have made a difference in Elijah’s life? The answer’s yes. A third party supplemental needs trust could have helped Elijah to have a good quality of life. A professional trust company could have managed the trust. Family members could have added money to this type of trust whenever they wanted. If there’d been sufficient money in the trust, Elijah could have had the case manager to help and guide him and a professional trustee to assist in his financial matters as well as his overall care. 

Now, I don’t want anything like this to happen to you, but unfortunately time escapes us all. Don’t let other priorities take over so your loved one misses out on their ability to have a third party supplemental needs trust and to live a good quality of life. 

Don’t let this happen to you or your child living with a disability. Start today.  I spoke in the last episode about putting things off. I respectfully suggest that you try to make the time and let us help you. You won’t be sorry. Start by calling an expert at Vista Points Special Needs Trust and Resource Center at 888-422-4076. There are three offices located across Tennessee. 

Each of us with Vista Points is here for you. I am a volunteer, and I believe Vista Points staff are professional, dedicated, educated, personal, multi-talented, and the most important to me is their understanding. If I had a special needs trust, I’d want them on my side.

Thank you for tuning in to today’s episode of Choose Your Path, a Vista Points podcast. Subscribe now to our YouTube channel named Vista Points SNT, that’s S-N-T as in special needs trust. There you can subscribe and be notified as the latest episodes go live, which is the 1st and the 15th of every month. 

You can find past episodes on the Vista Points website at vistapoints.org, as well as a transcription of each podcast. The episode topics are in response to the listeners’ questions! If you haven’t asked your questions yet, I encourage you to ask or share concerns online or by calling. When you’re online, visit the Facebook page named VistaPointsInc and send a direct message, otherwise known as a D-M, to VistaPointsInc, that’s Vista-Points-I-N-C. 

Or, call the Vista Points office at 888-422-4076. That number, 888-422-4076. Each of the Vista Points team wants to answer your questions and assist you in whatever way they can.

Now, enjoy your day with your loved one. Come back for more or look into past episodes of Choose Your Path. Regardless of where or when you find us, we walk beside you on your path. I look forward to our next steps together and speaking to you soon.