All parents worry about their children’s futures – it’s part of the job. But parents of children with special needs may face more uncertainty. Some of the biggest concerns special needs parents have are financial. Mapping out your child’s financial future can seem like a daunting task, but having a plan in place can help ease your fears.
There are complex legal and governmental issues surrounding disability so planning for the long term can be tricky. The wrong decision might create a tax burden or render a child with special needs ineligible for government benefits. Having a strategic plan that maps out your vision for your child’s future can lessen some of the uncertainty. Below are three things I recommend parents of children with special needs do to plan for their future:
- Create a letter of intent - No one knows your child better than you do. If something were to happen to you, how can you express your wishes for your child’s future and share all the facts about your child’s wants, needs, and care? While not a legally binding document, a Letter of Intent will serve as a guide for future caregivers and cover topics such as: daily schedule, medical history, education, benefits received, and your vision for your child’s future.
- Create a special needs trust - Work with an attorney to create a special needs trust. Such trusts are an important part of your child’s long-term financial plan. The trust will serve to benefit your child in two ways: A trustee that you identify in the trust document will manages the assets inside the trust for the best interest of the beneficiary and limit the beneficiary’s access based on the trust document’s stipulations (i.e., The funds can’t be used to buy a sports car, but can be used for food and lodging). The second benefit of having the assets in a trust will preserve the beneficiary’s eligibility for public benefits, such as Medicaid and public housing. You should work with an experienced Financial Advisor and a Trust Lawyer to establish and fund the trust.
- Name a trustee – The trustee is the individual or institution that is responsible for administering the trust in accordance to your trust document. A trustee is usually not the same person that is named as a guardian. A trustee can be a close friend or family member or an institution, such as a bank or trust company. The trustee controls the money and is responsible for investing the assets and dispersing them as necessary. They should also serve as a partner to a future caretaker to help make and be the voice of reason when tough financial decisions need to be made.
A great place to start planning for the financial future of your child is with your Financial Advisor. You are planning for two generations - yourself and your child. Your Advisor will help you organize and prioritize your personal financial goals and wishes and help you create a long term financial plan for your child. They will also be able to refer you to the appropriate attorneys, accountants, and other service organizations that would be of help. Having a team by your side is easier than going at it alone.