Can a Settlement Trust Pay a Parent for Care Provided to a Child?

One question that we often get regarding settlement trusts is the ability or inability of the trustee of that trust to pay a caregiver for the beneficiary’s care, such as in the case of a trust set up for an injured minor child.

In many situations, after an accident or injury occurs, the parent of that minor child can no longer work outside the home because they have to take care of their injured child. It essentially becomes their full-time job.

Thus, in these types of situations, a common question is this: “Is there a way for the settlement trust to pay the parent for the caregiving provided to the child?”

The short answer is yes. The long answer is: If it’s a special needs trust, then you have to be careful not to pay too much income to the caregiver. Providing too much income to the caregiver of the child will make them lose the Medicaid and/or SSI benefits the special needs trust is designed to protect.

However, as long as careful planning occurs, paying a parent as a caregiver from a special needs trust can be a great way for a parent to get some income from the trust. This allows the parent of the disabled child to stay home and take care of the child — while also providing some income to the family.

When making the decision of whether or not to pay a parent as a caregiver from a special needs trust, it’s important to consider the amount of money inside the trust, and what the needs of the children are in the short and the long term — and to balance those needs with the financial needs of the parents and household.

If you are dealing with a situation where a child is receiving settlement money and the parents are wondering how they are going to make ends meet because the whole settlement is going to their child, give us a call. We can help you work through those issues and try to find a balance that can protect the child’s money, but also help indirectly benefit the parent and the rest of the family. We’d be happy to speak with you about your situation and see if there’s a plan and approach that could work for you.

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