Special Needs: Financial Planning Today Means Care For Tomorrow

Coping with a special-needs child’s diagnosis can take its toll, but don’t delay planning for the future.

by Melanie Gaball

Financial Planning Today Means Care For TomorrowFinancial planning is important for parents, but for those who have a child with special needs the complexities of funding a lifetime of care can be overwhelming and emotional. While many parents are still dealing with the acceptance of their child’s diagnosis, developing a financial road map for their family’s life may not be something they’re ready to face.

When a child first receives a special-needs diagnosis, parents want to believe things will get better. Whether they hope for a cure or think their child will grow out of it, they often postpone long-term financial planning. However, in most cases, children with special needs grow up to be adults with special needs and parents should begin the financial preparation as early as possible.

1) Parents must consider what will happen to their child when they are gone.

“Typical parents never want to outlive their child, but a parent with a special-needs child wants to outlive their child by one day, because they know that no one will take as good of care of their child as they will,” says Todd B. Daniel, Special Care Planner for Mass Mutual.

Parents should begin planning for their child’s financial future as soon as possible. With improvements in health care, people with special needs can live long, full lives.

“The life expectancy of a child with down syndrome used to be 19, now it’s in the 50s,” says Scott Macdonald, Senior Vice President and Certified Special Needs Advisor for Merrill Lynch. “It is important to start planning early for the different milestones ahead and how they will be funded.”

2) Set up a special-needs trust to coordinate with government funding.

A person who is collecting disability benefits cannot have more than $2,000 in personal assets. In order for parents and relatives to put money away for a child’s future, and still allow that child to keep receiving government aid, they should work with an attorney to set up a special-needs trust, says Daniel.

“A special-needs attorney is crucial. The titling of assets must be done correctly and put into the special- needs trust, so that it doesn’t go to the government,” Macdonald says.

Parents can fund the trust in a number of ways. They can get money from extended family, do a monthly deposit or use life insurance.

“Using life insurance is the most inexpensive way to do it,” says Daniel. “Parents can use their assets for the things they need now, and buy the insurance to fund the trust, so when and if they pass then the million dollar life insurance policy goes into the account and now their child has money to spend for the rest of their life.”

3) Establish trustees and caregivers.

“A lot of times parents will say that one of the child’s siblings will be the caregiver if they pass, but they really need to make sure that the sibling is OK with that. It might not be fair to assume that the 17-year-old sister is going to spend the rest of her life taking care of her sibling, unless she wants to,” Daniel says.

Sometimes the caregiver and the trustee can be the same person, but it may be better to assign the roles to different family members, Daniel says.

Some parents may not want a family member managing the special-needs trust. If not, they can set up a trusteeship where a professional, such as a California Fiduciary, runs the trust, Macdonald says.

Creating a Letter of Intent is also an important step in the planning process. A Letter of Intent allows parents to disclose the needs of their child to future caregivers, says Daniel.

“A Letter of Intent is one of the best things a parent can start doing,” says Macdonald. “It is a non-binding, non-legal road map for their child (describing) where they will go when they are gone, what they like to do, what they like to eat,  and even what the parents hopes and dreams are for their child.”

A great way to do the Letter of Intent is to make a video of and about your child, says Macdonald.

4) Use all available resources.

For those who cannot afford a lawyer and want to seek legal help, Daniel suggests using Bet Tzedek, a non-profit organization that provides free legal advice and representation to low-income residents of Los Angeles.

Macdonald suggests working with a team of experts including a benefits counselor, specialized attorneys, a specialized financial planner, a California Fiduciary and caregivers.

“Parents should be able to focus on being loving and caring to their children and they shouldn’t have to be budgeting and monitoring finances all of the time,” Macdonald says. “They should also use support groups where they can talk to others about their experiences. They need to know they are not alone.”

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