When Your Child with Special Needs Doesn't Need a Special Needs Trust in North Carolina
If you're a parent of a child with special needs, you've probably wondered about the best way to protect their financial future. You may have heard that a special needs trust is essential—but what if we told you that's not always the case?
At The Walls Law Group, we work with families every day who are navigating these complex decisions. Many are surprised to learn that special needs planning encompasses far more than just special needs trusts. In fact, for many families in North Carolina, alternative planning strategies provide better protection and greater flexibility for their loved ones.
Understanding When Special Needs Trusts Actually Make Sense
Let's start with clarity: special needs trusts serve a specific purpose. They protect assets for individuals who:
Currently receive or will likely qualify for means-tested government benefits like Supplemental Security Income (SSI) or Medicaid
Need to preserve those benefits when receiving an inheritance or financial gift
If your child doesn't meet both criteria, a special needs trust might actually create unnecessary restrictions without providing meaningful benefits.
Consider Sarah's situation. Her 16-year-old son has high-functioning autism. While he needs support with daily living skills and money management, his intellectual abilities mean he'll likely never qualify for SSI. Sarah assumed she needed a special needs trust because her son has autism. After meeting with our team, she discovered a discretionary support trust would better serve her family's needs—providing protection without the stringent regulations that come with special needs trusts.
The Overlooked Alternative: Discretionary Support Trusts
A discretionary support trust (sometimes called an asset protection trust) offers many families the perfect balance of protection and flexibility. Under North Carolina law, these trusts allow a trustee to manage assets for your child's benefit while providing options that special needs trusts prohibit.
Key Advantages of Discretionary Support Trusts:
Greater Flexibility in Distributions Unlike special needs trusts, discretionary support trusts can pay directly for healthcare expenses, housing costs, and other necessities. This matters when your child doesn't receive government benefits that would otherwise cover these expenses.
Direct Spending Money When Appropriate For individuals with intellectual or developmental disabilities who can handle small amounts of money responsibly, these trusts can provide modest direct distributions for personal spending—something special needs trusts strictly forbid.
Simplified Administration Without the complex reporting requirements and spending restrictions of special needs trusts, trustees can focus on what matters most: supporting your child's quality of life.
Adaptability Over Time As your child's needs change, discretionary support trusts can evolve more easily than special needs trusts, which must maintain strict compliance with government regulations.
Recognizing Which Families Benefit Most from Alternative Planning
Many conditions fall into what we call the "planning gap"—situations where children need financial protection but don't qualify for government benefits. According to a 2022 report by RTI International commissioned by the General Assembly, approximately 13% of students in our state receive special education services. Yet only a fraction of these students will ever qualify for SSI or Medicaid.
Common scenarios where discretionary support trusts often work better include:
Children with learning disabilities who can work but struggle with financial management
Young adults with high-functioning autism who need guidance but maintain too much independence for government benefits
Creating Your Family's Personalized Plan
Every family's situation is unique, which is why cookie-cutter approaches rarely work in special needs planning. When you work with our team, we take time to understand:
Your child's current abilities and future potential
Whether government benefits are realistic now or in the future
Your family's financial resources and goals
The level of support your child will need throughout their lifetime
This comprehensive approach ensures we recommend the right strategy for your specific circumstances, not just the most common solution.
North Carolina-Specific Considerations
Planning for a child with special needs in North Carolina involves understanding our state's unique laws and resources. The North Carolina Department of Health and Human Services offers various programs that may affect your planning decisions, including:
CAP/DA (Community Alternatives Program for Disabled Adults)
State-funded group homes and supported living arrangements
Understanding how these programs interact with different trust structures helps us create plans that maximize available resources while protecting your child's eligibility for future benefits they may need.
Common Misconceptions That Could Cost Your Family
"My child has a diagnosis, so they need a special needs trust." A diagnosis alone doesn't determine the right planning strategy. We evaluate functional abilities, benefit eligibility, and long-term support needs to find the best approach.
"Special needs trusts provide the most protection." While special needs trusts protect government benefits, they also impose significant restrictions. For families who don't need to preserve benefits, these restrictions can actually limit your ability to provide for your child.
"We can wait until our child is older to decide." Planning early gives you more options and ensures protection is in place when needed. In North Carolina, waitlists for certain services through the Registry of Unmet Needs can extend several years, making early planning even more critical.
Taking Action: Your Next Steps
Determining the right planning strategy starts with an honest assessment of your child's needs and your family's resources. Here's how to move forward:
Gather Current Information Document your child's current abilities, support needs, and any benefits they receive. Include IEP documents, psychological evaluations, and vocational assessments if available.
Consider Future Scenarios Think realistically about your child's potential for independence, employment, and benefit eligibility. Consider best-case and worst-case scenarios.
Assess Family Resources Understand what assets need protection and who might serve as trustees or guardians. Consider both immediate family and extended support networks.
Seek Professional Guidance Work with attorneys experienced in both special needs trusts and alternative planning strategies. The right advisor will explain all options, not push a one-size-fits-all solution.
How North Carolina Law Protects Your Planning
North Carolina offers strong protections for both special needs trusts and discretionary support trusts. Our state's trust laws provide:
Protection from creditors for properly structured trusts
Flexibility in trustee selection and succession planning
Clear guidelines for trust administration and distributions
Working with attorneys who understand these North Carolina-specific protections ensures your plan will stand up to future challenges and truly serve your child's needs.
The Bottom Line: Your Child Deserves Customized Protection
Special needs planning isn't about following a predetermined path—it's about creating the right protection for your unique situation. Whether that's a special needs trust, a discretionary support trust, or another strategy entirely depends on your child's specific needs and circumstances.
At The Walls Law Group, we've helped hundreds of North Carolina families navigate these decisions with confidence. We understand that behind every planning decision is a parent who wants the best for their child. That's why we take time to explain your options clearly, answer your questions thoroughly, and create plans that truly serve your family's needs.
Remember, the goal isn't to use the most complex planning tool—it's to provide the right protection and support for your child's lifetime. Sometimes that means thinking beyond traditional special needs trusts to find solutions that offer both security and flexibility.
Ready to explore what planning strategy makes sense for your family? Contact our Raleigh office to schedule a consultation. We'll help you understand your options and create a plan that gives you peace of mind about your child's future.
This blog post is for informational purposes only and does not constitute legal advice. Special needs planning involves complex legal and financial considerations that vary significantly based on individual circumstances. Please consult with an attorney experienced in disability planning to discuss your specific situation.
The examples used in this post are composites based on common situations we encounter in our practice. Names and specific details have been changed to protect client confidentiality.
