Raising a child with special needs can be a rich experience. It’s also a costly one that comes with unique challenges for your financial future and estate plans. There is no one-size-fits-all recommendation, but here are some things to consider:
Your future security: Protect your children by securing your own financial future. Start saving for retirement as early as possible to take advantage of compound interest.
Life insurance: Consider investing in enough life insurance to care for your child’s future financial needs. Government benefits can cover basic costs, but extra funds can fund additional expenses, such as hiring an additional caregiver after you’re gone. Talk to an advisor about beneficiary designations and consider a special needs trust. Consider disability insurance, too, to protect your family financially if you are living but no longer able to work.
Special needs trust: Assets held in a child’s name are held against them and could disqualify them from government benefits. One way to avoid that is to set up a special needs trust. The intent is that a special needs trust can supplement a disabled person’s income in order to pay for extra wants and needs not covered by government benefits. The living trusts which we now prepare include provisions for creation of special needs trusts if a need arises in the future.
Educate your family: If you think your parents or another family member might leave a legacy to your child, make sure they understand the implications of a cash gift and the benefits of a special needs trust.
529 ABLE (529A): Like a 529 education plan, a 529A is a tax-advantaged way to save for your child’s special needs education and certain disability expenses. Generally speaking, parents should consider maxing out their own retirement accounts before funding supplemental savings tools like these. Be aware that when an account exceeds the government’s threshold amount, your child will no longer be eligible for Supplemental Security Income (SSI) payments.
Adult guardianship. If your child will be unable to make medical and financial decisions after they turn 18, talk to a lawyer about a power of attorney and health care proxy or becoming your adult child’s legal guardian. Don’t assume you’ll automatically be able to make decisions for them just because they’re disabled.
When you have children with special needs, financial planning takes special care. It can be an emotional, frustrating process. An estate-planning attorney can help you be proactive and create a plan so that both you and your children are
cared for and protected.