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How Do I Fund a Special Needs Trust for My Child?

The average cost to protect and raise a special needs child has been calculated to be around $2.4 million. Once your attorney sets up a Special Needs Trust (SNT) for your child, you’ll have to find a way to add enough funds to the SNT to cover their needs after you’re gone. There are a number of ways to do this depending on your circumstances:

  • Life insurance policies
  • Annuities
  • Savings, retirement, pensions, and investment accounts
  • Real estate
  • Government benefits
  • Legal settlements
  • Personal contributions
  • Gifts, charitable contributions, and crowdfunding


Life Insurance –

Naming the SNT as the beneficiary of your life insurance policies can provide a significant source of funding.

You can personally have more than one type of policy in effect – utilizing whole life insurance and complementing it with term life coverage to cover your mortgage. This gives you two potential assets for your child – after the house is paid off, your child has that equity plus the whole life policy.

If you’re married, you and your spouse can each have separate life policies. Depending on your situation, you may choose to designate your spouse as the primary beneficiary and the SNT as the contingent beneficiary. That way, when the first spouse dies, the death benefit goes to the surviving spouse; when the second spouse dies, the benefit goes to the SNT.

Annuities –

If you have an annuity set up to give you an income stream after you retire, you can add the SNT as a beneficiary to your account.

Savings, retirement, pensions, and investment accounts –

You can add the SNT as a beneficiary to most of your basic financial accounts. But talk to me about your retirement accounts first so we can make sure any transfer of funds doesn’t result in both a tax penalty and disruption of any government assistance your child is eligible for.

Real estate –

By leaving ownership of your real estate to the SNT after you pass, you will enable your child to continue to live in the home they know. Or if the property needs to be sold, any proceeds of the sale remain in the SNT.

Government benefits –

Depending on your child’s disability and eligibility, certain government benefits can be used to fund the SNT.

Legal settlements –

If your child’s disability was due to an accident or medical malpractice, any legal or structured settlements you win can be used to fund the SNT.

Personal contributions –

You can also add your own money to the SNT at any time.

Gifts, charitable contributions, and crowdfunding –

Other people (friends, colleagues, family, neighbors) can also contribute to the SNT. Be aware that most crowdfunding sites take a larger than expected cut for their fees. Ask me about tax implications for these types of gifts.


I have a special needs daughter of my own. I know how overwhelming it can be at times. Let’s set up a time to chat and talk about your options. You’re not alone.

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