How a Special Needs Trust May Protect Your Child’s Future after Settling or Winning a Birth Injury Case in Court

The first battle is getting the financial support you need for your baby’s birth injury through a medical malpractice action. The second challenge is managing a settlement or damages award to ensure that your child has all of the necessary care for as long as they need. How do you budget for your child’s possible lifelong needs while protecting their right to government benefits? There are different approaches to managing a settlement, but it is important to understand the utility of a special needs trust and the possibility that it may offer the best solution for your child’s birth injury compensation.

Eligibility for Government Benefits and Other Important Concerns when Your Child has been Injured by Medical Malpractice

Government benefits, such as Social Security Income (SSI) and Medicaid, assist those with disabilities, including birth injuries. Since disabled people are often unable to earn income, they depend on government assistance for their living essentials. A child disabled by a birth injury typically needs those benefits for healthcare and daily care items. However, other income sources may disqualify eligibility for those benefits. Since a settlement award is finite, a wise investment in a special needs trust can provide money as needed while preserving the right to government benefits.

The Basics of Special Needs Trusts

A special needs trust is a legal agreement to keep and administer assets, like settlement funds, to benefit someone with disabilities. By placing birth injury awards and other assets in a special needs trust, the beneficiary does not forfeit their eligibility for Medicaid and SSI because they are not receiving the assets directly from the government source. Thus, they can receive money from special needs trusts and the government.

What a Special Needs Trust Offers

Since some birth injuries leave children with lifetime needs for nursing care, various therapies, educational tutoring, periodic surgeries, and home modifications, governmental benefits alone may not cover the costs. As such, a special needs trust is critical to supplement benefits for daily care, life enrichment activities, and entertainment for the long run and protect a birth injury settlement from Medicaid or SSI payment reimbursement.

Other benefits may include tax-deductible income to the beneficiary, disbursement of inherited retirement accounts over the disabled person’s lifetime (without a retirement funds spending requirement within a prescribed time), and the right to designate a charity as a remainder beneficiary to receive any remaining trust assets after the special needs beneficiary’s death.

The Critical Role of a Trustee to Manage Your Child’s Special Needs Trust

A special needs trust includes a trustee designation, meaning the trust orders a trustee to manage the trust according to the trust maker’s wishes. So, a parent may create a trust with the help of an estate lawyer and appoint a trustworthy relative to manage and distribute the trust funds according to the beneficiary’s needs that government benefits do not cover. The trust document includes instructions on trust management and administration.

The trustee plays a significant role in administering and maintaining a special needs trust. They not only dole out payments as instructed by the trust and invest trust property, but they also administer the trust obligations, such as preparing and filing tax documents for the trust, keeping an annual accounting, and reporting to the Social Security Administration. The trustee must be someone who can perform all of their duties and understand the beneficiary’s needs.

Naming the Optimal Trustee for Your Child’s Special Needs Trust

A special needs trust can be complicated. It must comply with applicable laws, so the trustee must understand and know how to carry out trust duties legally. As such, choosing an appropriate trustee, one knowledgeable and trustworthy, can be a daunting task. A relative may not be up to the task so in some cases, a professional trustee may be necessary and the most equipped to handle the task. A professional trustee can charge for their time performing trust duties, but their knowledge of the intricacies involved can provide advantages for the rest of your child’s life. Weighing all of the options and designing the optimal trustee is crucial to best preserve your child’s future and provide for their long-term financial and other needs.

Contrasting First-Party and Third-Party Trusts for Children with Birth Injuries

Special needs trusts are either first-party or third-party trusts. In a first-party trust, the trust assets are the property of the disabled beneficiary, who must be under 65. So, the first-party trust is self-funded. On the other hand, someone other than the disabled beneficiary creates and funds the third-party special needs trust. Typically, the beneficiary’s relative establishes the trust (but can be a disinterested party), like a parent or grandparent, and the beneficiary may be any age. The trust assets can be anything, such as a personal injury award, real estate holdings, investments, and insurance policies.

Lastly, a pooled special needs trust includes pooled funds from more than one person with disabilities. This trust type may be appropriate for a family with several disabled members. All special needs trusts fulfill the same purposes of financing the needs of people with disabilities beyond what public benefits provide.

Dedicated New Jersey Attorneys Putting Your Child’s Interests First

Most people who receive a birth injury settlement or damages award on behalf of their child are not well-versed in their options and obligations when handling a potentially large settlement sum meant to last from childhood to death. Our accomplished team of attorneys has successfully handled countless birth injury cases on behalf of children throughout New Jersey, and we are here to assist you with resolving your difficulties and confusion as it relates to filing a claim, negotiating a settlement, trying the case in court, and understanding the utility of a special needs trust to preserve your child’s best interests and provide for their needs down the road. We can also connect you with other attorneys who specialize in all of the legalities of special needs trusts and can assist you with creating the one that is right for your child and your family.

If you have a child who has been injured by negligent medical care, contact us anytime at (866)-708-8617 for a free review of their case and to discuss the rights and options that may be available for seeking compensation.