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Financial Planning Considerations With a Special Needs Child

What You Need to Know When Planning With a Special Needs Child

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Everyone has financial needs, but if you’re the parent or guardian of a child with special needs, some unique considerations need to be made. There are a number of legal, medical, and financial issues you should plan for. According to Harry Margolis, a long-time special needs attorney and co-founder of the Academy of Special Needs Planners, there are three particular areas that need attention.

1. Caring for the Child When You’re Gone

What happens when you are no longer able to care for the dependent with special needs? Who will be there to take over? In a situation with someone that has special needs, you need to make sure that the child or dependent will continue to receive the best care in the event something happens and you are unable to provide that care. There are a few legal options that can help.

Guardianships and Conservatorships

A guardianship or conservatorship is a legal mechanism that grants a designated adult legal power to make decisions for another person, one who is considered unable to make decisions on their own. When your child turns 18, they may need a guardian or conservator to manage certain aspects of his or her life.

There are also different types of guardianship and conservatorship. A general guardian or conservator may grant full decision-making powers. This could include decisions on finances, living arrangements, and medical decisions. You also have limited conservatorship or guardianship. The powers of a guardian can then be limited to address the specific needs for the individual. Since these issues can be a bit complex, an attorney that specializes in this area will prove invaluable.

2. Maintaining Public Benefits Eligibility

Another major consideration has to do with government benefits. This can be especially important when it comes to the distribution of assets upon the death of the parents of a special needs child. If parents die without a will or trust, in most cases, assets would be distributed to the children. Assets in excess of $2,000 distributed to a person with a disability may jeopardize government benefits. Maintaining eligibility for government benefits is important, so you want to make sure that you structure how your assets will be distributed upon your death so that these benefits will not be eliminated. One common way to do this is through a trust.

Generally speaking, a trust is a legal entity that holds and manages assets for the benefit of another. Then, a trustee assigned to manage the trust in the interest of the beneficiary. There is also the ability to create a special needs trust. This allows the inheritance assets to become property of the trust, and not the beneficiary. This can help maintain public benefits eligibility since the child would not be the recipient of the assets, yet financial assistance could be provided that help supplement these benefits.

Special needs trusts can provide a number of benefits. They may be used to provide for education, transportation, rehabilitation, insurance, and many other life-enhancing services. In addition, a trust has the ability to hold everything from cash and investments, to actual property.

3. Money Concerns

For most people, planning ahead financially involves saving for retirement, saving for your child’s education, and possibly some life insurance to provide for your spouse or child if you were to die unexpectedly. But when you have a child with special needs, there are a number of additional factors to consider.

How much money do you need to save for your child? While that isn’t an easy question to answer, you can begin by thinking about what type of care they need, and estimate how much it costs on a monthly basis. Then, think about how much this could cost over the child’s lifetime. While this won’t account for things such as inflation, it is a good ballpark estimate to start with.

The dollar amount you come up with may seem staggering. How will you ever be able to save enough money to provide the care your child’s going to need for the rest of their life while trying to fund your own goals?

One of the most common methods of funding this type of long-term care is through life insurance. Remember, when we discussed a special needs trust, it is a legal entity that can hold assets in which your child is the beneficiary. This also means that a trust can be the recipient of life insurance proceeds. Even more important, life insurance benefits can often be structured so that the funds can be used to provide for your child while keeping the rest of your estate intact.

There are a number of different types of life insurance, and your specific situation will ultimately determine what is best for you. For more information regarding all of these topics and more, be sure to check out the page for parents and families put together by the Academy of Special Needs Planners.

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