How a Trust Can Protect Your Special Needs Child

Republished with permission from the Nov. 15, 2019 edition of Memphis Business Journal.

Market President, Argent Trust-Memphis

Many parents’ deepest hope is that their children grow up to live healthy, independent lives.

But the reality is that sometimes a child’s physical or mental disability makes independent living impossible — frequently because of a severe birth defect or injuries from an accident. As the child grows into adulthood, their parents will naturally begin contemplating what will happen to the child when they’re no longer physically able to care for them.

Fortunately, a number of public benefits are available to special needs individuals through Medicaid and Supplemental Security Income (SSI), including full or near-full coverage for prescription drugs, physical therapy, medical procedures and, in some cases, facility-based or home-based care. However, because Medicaid is a means-tested program, parents who want to pass their estate to their child run the risk of their child not qualifying for these benefits if they give a direct inheritance.

For families in this situation, a supplemental needs trust could be the answer. These trusts offer a variety of benefits: They shelter a child’s inheritance from claims by creditors, protect the child against financial wrongdoing, and crucially, allow the child to maintain eligibility for federal assistance programs by keeping them within income and resource parameters.

Supplemental needs trusts aren’t designed strictly for the rich, and they can provide some benefits for a beneficiary even if they’re only funded with modest amounts of money. When a trust is set up, control of its assets is turned over to a qualified trustee. The child is designated as a beneficiary, with all financial decisions for the trust made by the trustee. Once the trust takes effect (often at the death of the parents), the trustee will essentially run the household of the beneficiary, managing any ongoing bills or payments on their behalf and making decisions regarding larger purchases.

Although a family member or close friend can be designated as the trustee, it’s not advisable to do so. Administering a supplemental needs trust is a complicated and time-intensive job, and a layman unfamiliar with the rules could very easily put a trust beneficiary at risk for disqualification from Medicaid. For the trust to work as intended, the trustee should be a professional with a fiduciary responsibility to the client — meaning that they’re legally required to put the client’s needs ahead of anything else.

The trustee does have a certain amount of latitude to determine how funds are distributed from a supplemental needs trust, as long as the expenditures improve the beneficiary’s quality of life and aren’t financially irresponsible. Although the trust can be used to pay for new clothes, vacations, and even expensive items like houses or cars, the trustee must pay for everything directly and can’t give cash to the beneficiary or other friends and family. Professional trust companies will typically require that all distributions from a trust be approved in advance by a committee.

Although the job of a trustee is financially oriented, it also requires empathy and concern for what’s truly in the beneficiary’s best interest. In one client case I worked on, an elderly couple had a son with Down syndrome. After the parents died, we had to decide whether the son would be happier moving to his own residence with in-home care or staying in the assisted-living home where his parents spent their final years. We made the decision that keeping him in the assisted-living home would give him the greatest level of comfort. The staff members there continue to make sure his basic needs are met, and although he has no living family, he’s surrounded by familiar faces. This arrangement has worked for him for more than 10 years now.

For a supplemental needs trust to last for decades, it requires professional management of its assets. That can be best accomplished by partnering with a fiduciary-level investment advisor, who will recommend a specific allocation of investments that prioritizes the protection of capital with modest growth. For our clients, for example, we partner with Highland Capital Management here in Memphis, which provides recommendations based on our clients’ limited risk tolerance.

For parents who are concerned about the welfare of their special needs child after their death, a well-administered special needs trust can provide a crucial safety net that lasts a lifetime.

About David Franks/Argent Trust Company

David Franks has been serving clients in the Memphis area for nearly 30 years, and is currently market president of Argent Trust Company’s Memphis office, joining the company in 2015. David serves high-net-worth clients with trust, investment, estate and family office services. He is a Certified Trust and Financial Advisor (CTFA) and an Accredited Investment Fiduciary (AIF®). Argent Trust Company is a division of Argent Financial Group (AFG) is a leading independent fiduciary wealth management firm. Responsible for more than $21 billion in client assets, AFG provides individuals, families, institutions and businesses with a broad range of wealth management services including trust administration and related services, investment management, family office services, retirement plan and charitable organization administration, mineral (oil and gas) management, and financial, retirement and estate planning. The company was also recently named for the second year in a row to the Inc. 5000 list of the fastest-growing companies in the U.S. For more information, visit


Argent Financial Group

Celebrating its 30th anniversary in 2020, Argent Financial Group (Argent) is a leading, independent, fiduciary wealth management firm. Responsible for more than $30 billion in client assets, Argent provides individuals, families, businesses and institutions with a broad range of wealth management services, including trust and estate administration, investment management, ESOPs, retirement plan consulting, funeral and cemetery trusts, charitable organization administration, oil and gas (mineral) management and other unique financial services. Headquartered in Ruston, Louisiana, Argent was formed in 1990 and traces its roots back to 1930.

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