Raising a family is challenging under any circumstances, but for parents with special needs children the stakes are dramatically higher because the parenting responsibilities may last the child’s entire life. This reality can be overwhelming, both emotionally and financially. One of the best ways to face these long-term challenges is to systematically establish a long-term plan, one that considers both the emotional and financial issues likely to be encountered.
Many special needs children may qualify for government assistance through the Social Security Administration, from either the Supplemental Security Income program (SSI), or the Social Security Disability Income program (SSDI). Eligibility for either of these programs can be complex, as both involve some means-testing to determine the extent of aid; financial decisions by the parents (such as investing in a tax-qualified retirement account or buying a home) can impact the amount of assistance received. This factor means parents must consistently monitor and review their financial plans.
In addition to handling the details that every-day parenting requires, parents who have special needs children usually have two primary long-term concerns:
- Who will be around to ensure the welfare of their children or make decisions for them if they are unable to care for themselves?
- How will they pay for it?
Answering these two questions is usually an interconnected process. If there is no money set aside for care, even the most qualified and trustworthy guardians (such as siblings) may not be up to the task. A good special needs care plan addresses both questions. Typically, this is accomplished through the establishment of a trust.
The trust will specify guardians, trustees and beneficiaries, as well as defining which assets should be placed in the trust. Two common types are Support Trusts and Special Needs Trusts. Support Trusts require the trustee to make distributions for the child’s support in areas like food, shelter, clothing, medical care, and educational services. It is important to note that beneficiaries of Support Trusts may not be eligible for SSI or Medicaid. If the special needs child will rely on government benefits for a significant portion of care, it may be best to avoid a Support Trust.
For many parents, a Special Needs Trust is the most effective way to help their child with a disability. A Special Needs Trust manages resources while also maintaining the child’s eligibility for public assistance benefits. When the trust is funded by the parents’ assets, it is called a Third-Party Special Needs Trust*. In some instances, the trust may be funded by the child’s assets (for example, when the receives a settlement from a personal injury lawsuit). This arrangement is called a Self-Settled Special Needs Trust.
Funding the Trust
Parents of a special needs child face some daunting financial challenges. From the moment the special need is recognized, all the financial metrics change. Not only is there a compelling desire for the parents to provide an estate at their deaths, but there is also the consideration that other aspects of their financial life must be altered, such as:
- If the parents’ diminishing health affects their ability to provide care, someone else must take their place.
- With continuing parental duties, the dynamics (and costs) of retirement will be different.
- Besides providing immediate protection, a life insurance program might be constructed to provide guaranteed funding for a special needs trust.
Extended Family Considerations
The time and financial resources devoted to a special needs child can create imbalance and stress for other family members, particularly siblings. Because brothers and sisters will be a part of a special needs child’s life longer than anyone, the Sibling Support Project (siblingsupport.org) states that “Early in life, many brothers and sisters worry about what obligations they will have toward their sibling in the days to come.” And in many instances, one or more of the siblings will assume guardian and care responsibilities after the parents have passed away.
The immediate realities of receiving less attention and the future possibility of having to care for a special needs child – perhaps at significant emotional and financial cost – can lead to resentment. Extended family planning can mitigate these feelings and help reshape the discussion. Experts in special needs care recommend that parents involve other children in the decision-making process as early as possible, because in the long run, this is not just a nuclear family issue. In addition, establishing an estate plan that provides an equitable inheritance for the rest of the family can help the extended family members support the special needs program, because it is seen as part of a larger financial plan made for the purpose of benefiting all children.
Don’t Go It Alone
These plans, and the details they involve, require expert assistance. Integrating government regulations, legal designations and funding combinations is not a do-it-yourself project. Finding competent financial professionals and maintaining regular communication with them will go a long way toward maximizing the benefits of a special needs plan.
If you have children or grand-children with special needs, planning is essential to their long-term well-being. We can provide products, resources, and financial knowledge. Call us at 877-889-3981, ext 120.