As parents of a child with special needs, my wife Sandy and I understand the overwhelming responsibility of planning for the future. This year, we finally took the time to set up a Special Needs Trust (SNT) for our child—and let me tell you, the weight off our backs is tremendous.
For years, we put it off, thinking we had time. But deep down, we knew that unexpected life events could leave our child vulnerable. Now that the trust is in place, we feel peace of mind knowing that no matter what happens, our child will be financially secure and supported.
If you haven’t set one up yet, I want to share why an SNT is so important, how you can get started without feeling overwhelmed, and why Tennessee is one of the best states for Special Needs Trusts.
What Is a Special Needs Trust?
A Special Needs Trust (SNT) is a legal arrangement that helps parents and caregivers set aside money for a child with disabilities while ensuring they remain eligible for government benefits like Medicaid and Supplemental Security Income (SSI).
Unlike a regular savings account or inheritance, funds in an SNT do not count as personal assets, allowing your child to receive financial support without jeopardizing their eligibility for essential benefits.
Types of Special Needs Trusts
- First-Party SNT: Funded with assets owned by the person with special needs (e.g., inheritance, lawsuit settlement). Upon their passing, remaining funds must reimburse Medicaid.
- Third-Party SNT: Funded by family members. These do not require Medicaid reimbursement, allowing leftover funds to be passed on to other beneficiaries.
- Pooled SNT: Managed by a nonprofit organization, pooling multiple beneficiaries’ funds while keeping individual accounts separate.
Why a Special Needs Trust Matters
Without a properly established trust, any inheritance or financial support left directly to your child could exceed government-imposed asset limits, disqualifying them from benefits.
Key Benefits of an SNT
✅ Preserves eligibility for crucial government programs (Medicaid, SSI).
✅ Protects assets from misuse or exploitation.
✅ Ensures financial security for your child’s long-term needs.
✅ Allows family contributions without legal complications.
✅ Offers professional financial management through a trustee.
Many parents assume government programs will cover all expenses, but in reality, these benefits only cover basic necessities. A Special Needs Trust allows your child to enjoy a better quality of life by covering additional healthcare, education, therapy, housing, recreation, and other personal expenses.
Why Tennessee Is a Great State for Special Needs Trusts
If you live in Tennessee, you’re in luck—our state is one of the best in the country when it comes to Special Needs Trust laws and protections.
Tennessee has:
✅ Strong legal protections to ensure assets in a Special Needs Trust are properly managed and protected.
✅ Excellent pooled trust options through nonprofit organizations.
✅ Favorable tax and Medicaid rules that help maximize financial resources.
✅ Supportive financial planning networks that make it easier to find knowledgeable attorneys and advisors.
Sandy and I were relieved to learn that Tennessee’s laws make it easier to set up and maintain an SNT, helping our child get the most benefit with minimal hurdles.
Why We Procrastinated – And Why You Shouldn’t
Sandy and I put off setting up our trust for too long, for all the same reasons many parents do:
- “We don’t have enough money to set up a trust.”
Fact: You don’t need a large sum to start. Even small contributions add up over time. - “We’ll just leave money to our other children to take care of their sibling.”
Fact: This approach is risky—divorces, lawsuits, or financial trouble could prevent them from fulfilling this role. - “Trusts are too expensive and complicated.”
Fact: While legal fees are involved, a well-structured trust can save thousands by preserving benefits and avoiding costly mistakes. - “We’ll do it later.”
Fact: Life is unpredictable. The sooner you establish a trust, the more prepared you are.
Now that we’ve done it, the relief is indescribable. Knowing that our child’s future is financially secure—no matter what happens to us—is priceless.
How to Set Up a Special Needs Trust
If you’re ready to secure your child’s future, follow these five key steps:
1. Identify the Right Type of Trust
Choose between first-party, third-party, or pooled trusts based on your child’s assets and needs.
2. Choose a Trustee
A trustee manages and distributes funds based on the trust’s guidelines. This can be:
- A trusted family member
- A financial professional
- A nonprofit organization managing pooled trusts
3. Define the Trust’s Purpose & Rules
Outline what the trust should cover, such as:
- Healthcare costs
- Education and therapy
- Housing and transportation
- Recreational activities
4. Fund the Trust
You can contribute through:
- Personal savings
- Life insurance policies
- Gifts and family contributions
- Inheritance and estate planning
5. Work with a Special Needs Attorney
Consulting an experienced attorney ensures your trust complies with legal requirements and maximizes benefits.
Final Thoughts: Don’t Wait to Plan
Setting up a Special Needs Trust may feel overwhelming, but it’s one of the best ways to ensure your child’s long-term security. By taking action now, you gain peace of mind knowing your child will be financially protected—even when you’re no longer there to provide for them.
Next Steps:
✅ Research the best type of trust for your child.
✅ Talk to a financial planner or attorney.
✅ Ask Stella about resources locally where you live—she’s been a fantastic resource for local programs and support in Tennessee!
✅ Start the process—small steps lead to big security.
Sandy and I can tell you firsthand: Once it’s done, you’ll breathe easier. The stress and worry about “what if” situations fade away, and you can focus on being present with your child, knowing their future is in good hands.
References & Resources
- Special Needs Planning Statistics
- Financial Planning for Special Needs Children
- JPMorgan: Trusts for Special Needs
- Northern Trust: Special Needs Trust Guide
- Special Needs Alliance: Estate Planning
Would you like a checklist or worksheet to help organize your trust planning? Let me know how I can support you! 😊
