A Lifetime Of Support To A Child With Special Needs While Achieving Other Important Financial Goals
As the parent or guardian of a child with a disability, one of your greatest challenges is providing for your loved one’s ongoing financial security. Thankfully, people with serious disabilities are now living longer, fuller lives than ever thought possible. Yet this welcome trend has left many families unprepared for a significant financial challenge: the desire to help provide a lifetime of support to a child with special needs while achieving other important financial goals.
Taking your entire family into account- Addressing your complex financial needs successfully will require a strategy that goes beyond investment advice to integrate estate planning, insurance and trust considerations. This comprehensive view links special needs issues to your broader financial picture, benefiting both your child with a disability and your entire household. Example: Don’t leave out other siblings and focus only on the special needs child.
Saving for “two lifetimes”- Providing lifetime financial support to your child with special needs could easily erode resources earmarked for other goals. To avoid this, you’ll need to identify funding alternatives that won’t conflict with your efforts to build and manage wealth.
Obtaining government benefits - Even if you can easily support your child, you may want to consider the role of government benefits such as Supplemental Security Income (SSI). This means-tested program can provide a monthly stipend to your child once he or she achieves the age of majority and serve as the gateway to Medicaid and other benefits often critical to those with special needs. Example: SSI Eligibility is limited to those with no more than $1,500- $2,000 in personal assets, depending on the state, when the child reaches the age of majority, 18 or 21 depending on the state.
Establishing a Special Needs Trust - Families of children with special needs often find it important to establish a Special Needs Trust. A Special Needs Trust is a unique type of financial arrangement that can provide supplemental funds to enhance a child’s quality of life without jeopardizing eligibility for SSI. Example: Never leave anything to a child directly.
Considering lifestyle issues - As you plan for your family and your child with special needs, certain lifestyle issues may impact your decisions. Example: your child’s future living arrangements, ability to earn income and degree of self-sufficiency can all affect the amount of support required.
Involving extended family members - Well-intentioned relatives could jeopardize your child’s eligibility for government benefits by providing direct gifts or bequests. Including extended family members in planning discussions could help them work in concert with your financial view of the future.
Draft a Letter of Intent - A Letter of Intent should describe your family’s and your child’s wishes for the future once you are gone, and should include pertinent information about your child’s history, medical needs, preferences regarding living arrangements, and hobbies and interests. The letter may not answer every question that arises concerning your child’s care, but it will serve as a valuable guide for your Financial Advisor, attorneys and future care providers. Example: My children have been raised in the following religion. The following methods of discipline are acceptable or totally unacceptable. This should include likes and dislikes and is very important information at a critical time of transition. (This is non-binding and not a legal document but very important if a guardian is appointed.)
Beneficiary Checklist - An overlooked beneficiary designation can void all the planning you have done to help insure your child’s quality of life when you are gone. Consider the following issues annually as you review your overall financial situation.
- don’t assume anything. Just because you asked someone to change a beneficiary doesn’t mean it was changed. Make sure you get written confirmation on how the beneficiary statement reads.
- Indicate both primary and contingent beneficiaries. Administrative clerks sometimes ask you to provide the name of your primary beneficiary, and then fail to ask you to provide a contingent beneficiary. Or they complete the contingent beneficiary section by inserting something vague such as “surviving heirs.” Be sure to designate both primary and contingent beneficiaries.
- Pay attention during periods of life transition. This is when most mistakes occur. If you are changing jobs or financial institutions, or the company with which you do business gets sold, review your beneficiary designations.
- Share information with relatives. Make sure your relatives are aware of how to name your child as a beneficiary. Let them know that instructions such as “all surviving grandchildren equally” can cause problems.
- Be thorough in reviewing the following types of accounts:
— Life insurance, both personal and work
— Retirement accounts (employer, 401(k), IRA, Roth IRA, deferred compensation, executive compensation plans, etc.)
— Tax-deferred annuities
— Pension benefits, especially benefits that guarantee a minimum of payments
— Wills, trusts and Letters of Intent