(800) 682-3237 www.rfadvisors.com WEALTH MANAGEMENT Financial Planning for Special Needs Families Financial Planning 101 for Special Needs Families Whatsoever the nature of your child s disability, one of the most important things you can do to ensure that you will be able to provide for his or her needs in the future is to establish a comprehensive and well thought-out financial plan. For example, as friends worry out loud about how they ll pay for their kids college education, the parents of children with special needs have worries that extend beyond the few years it takes to get a college degree. Other more fundamental questions might include: How will we pay for the special therapies our child needs now? Who will pay our child s expenses once he or she becomes an adult? Where will our child live and who will oversee his or her care after we re gone? Questions like these and fears might stop you in your tracks. However, financial planners say that creating a comprehensive plan can ease anxiety. Some of the more specific issues you will need to confront are financial: How do you set aside money for your child without affecting his or her government benefits? And some are emotional: Who would understand your child s needs if something were to happen to you right now? Below are four core planning concepts that are by no means an exhaustive list of planning points. However, they do provide a baseline of what should be considered in special needs planning at every stage. Think of them as the basics you need to consider. They should of course be reexamined from time to time to be certain the recommendations stay current with your own family needs but they are indeed the core in developing an overall planning strategy. Financial Legal Family & Support Special Needs Financial Planning Government Benefits
Family & Support Factors First, ask the people whom you want involved with your child s life and whether or not they want to be engaged before you just name them in your plan. Help prepare future guardians, caretakers and successors for their roles. Complete a Letter of Intent Of course preparing for your child s financial future is important. But hand-in-hand with that is making sure that your child s everyday needs will be met should anything happen to you. That s where a letter of intent comes in. A letter of intent is a document which outlines the details specific to your child, is free of charge, and can easily be done at home, at your earliest convenience. It is a great way to help families get started as soon as possible. For example, is your child s daily routine very important? Write it down and be as detailed as possible. The same goes for your child s daily, weekly and monthly schedules. Also include things that your child likes and dislikes and helpful resources in the community. It can be very generic, or even as detailed as going to the movie theater and getting a red icee, popcorn, and sitting in the 4th row, 5th chair in. Create a list of contact information for your child s physicians, therapists and other medical support people as well as current medications and their dosages and schedules. Are there people you don t want around your child or activities to be avoided? Write that down too. Once a year, update the letter. This is not a formal document, so you can draft it yourself. Keep a copy wherever you have copies of your Will and make sure that your child s appointed guardian has a copy too. At the very least, drafting and signing a Letter of Intent will allow you to pass on information to those that will care for your child. It is your last chance to share everything you possibly can with those that will care for your child should you pass away. Financial Factors Parents of children with special needs learn quickly that just because a child requires a certain treatment or therapy does not mean that the government will offer to subsidize or that insurance will cover it. This is where personal savings become so important. Start putting aside whatever you can each month to cover these extra expenses. Just make sure you never put money in your child s name. For example, Grandparents, aunts, uncles, and other loved ones might want to help out with expenses
Although well intending, explain to all family members the importance of not putting anything or assets in your child s name. Have a family meeting and explain why grandpa can t leave anything to your child in his Will or name your child beneficiary on his life insurance policy. Explain that instead of leaving a monetary gift or an inheritance in the child s name, leave assets in his or her special needs trust or risk forfeiting government benefits. The same goes for gifts of savings bonds or stocks: nothing should ever be left in your child s name (see special needs trust information below for legal factors to consider). When your child is about 16, start thinking about where he or she will live as an adult. In most states, people with special needs are 21 or 22 years old when they become ineligible for education services through the local public school system. So plan ahead and start thinking: Will your child remain living with you? If so, will support personnel be needed during the day when before he or she used to be at school? Are day programs for adults with special needs available in your area? If independent living is a goal, start investigating options in your community such as shared living, group homes or apartments. Once you find a place you like, get on a waiting list if there is one. Another consideration is adding or increasing to your life insurance policy. Many families boost their life-insurance coverage especially if they want to leave money to other children as well. Legal Factors to Consider As mentioned before, in most cases, money should not be left directly to your child, whether in an ordinary trust or through a Will. If it were, it could push the child s assets over the eligibility limit for receiving financial assistance from the government. A person with less than $2,000 in assets who is incapable of earning more than $1,130 a month (in 2016) is entitled to receive Supplemental Security Income (more on this later). The Federal Government pays $470 a month in S.S.I. and subsidies in some states can bring the amount to as much as $650/mo. If a person does not receive at least $1 in S.S.I., he will not be eligible for Medicaid in most states. To avoid going over the asset limit, establish what is commonly referred to as a supplementary-needs trust (typically, a simple Will and supplementary-needs trust can cost $500 to $1,200 depending on the region and the complexity of the family s finances). A supplementary needs trust spells out that funds in the trust will be used for expenses, like recreation and clothing that are not covered through government programs. A better solution is a special-needs trust, which acts as a receptacle to accept money earmarked for the child and
may be used to pay for the amenities that government programs don t provide. The trust can see that children have the opportunity to travel to visit relatives, celebrate birthdays and holidays and enjoy some measure of entertainment. Even if you re unable to pay into a trust right now set one up anyway. This way, you can make the trust the beneficiary of any life insurance policy and your estate, ensuring that those assets don t get passed to your child when you die. Why wouldn t you want your child to be the beneficiary of your estate? Because showing more than $2,000 in assets could make your child ineligible for federal benefits such as Supplemental Security Income (SSI). Also, check beneficiary designations on all life insurance, retirement plan accounts and annuities. This includes employer benefit plans. Any error that implies that your special needs child is a beneficiary on any of these accounts could force your child to forfeit any governmental financial assistance. As for establishing a Will, this instrument specifies what will be done with your assets after your death. By writing a Will, you make sure that your assets are left to the special needs trust and not to your child. Without a Will, a probate court judge could name your child as a beneficiary, which could make your child ineligible for federal benefits (see below). The Will is also where you can specify a guardian who will take care of your child. Government Benefits As far as government benefits are concerned, know and pursue your child s legal rights and entitlements. Below is a brief overview of key government assistance programs. For example, the Social Security Administration provides two types of disability coverage: The first is Supplemental Security Income (SSI) In a nutshell, SSI is a needs-based, cash assistance program (similar to welfare) for disabled people of any age in low-income families with limited resources. Children under 18 qualify (under 22 If they attend school) for SSI benefits if the meet these criteria: They have a medically determinable physical or mental impairment which results in marked and severe functional limitations (including blindness) The condition has lasted or can be expected to last for at least 12 continuous months They must not work and earn more than $1,130 a month (non-blind) or $1,740 (blind)
The second is Social Security Disability Income (SSDI) which is a separate program funded by payroll deductions (part of FICA). Although children sometimes receive SSDI payments, if their parents are disabled, in those cases their eligibility is based on their parent s disability status, not on their own. However, after turning 22, already disabled children may qualify for SSDI on their own if at least one parent is already receiving Social Security retirement or disability benefits. One other important federal program for special needs children that should be brought to our attention is the Individual with Disabilities Education Act (IDEA). This federal Act requires states to provide free and appropriate education for children with disabilities until age 18 (most states continue services until age 21) potentially saving parents tens of thousands of dollars. More than six million children with disabilities receive special education and related services throughout the country. Eligibility rules and definitions for SSI, SDI and IDEA are very complex. To find out if your child qualifies, call Social Security directly or visit the Social Security website and search under the Disability and SSI tabs. Key Takeaways Make sure other family members are conversant and understand your aspirations regarding your planning desires and wishes for the well-being of your special needs child. A letter of intent can guide any future caregivers about your child s special needs. Seek qualified specialized attorneys when drawing-up legal documents such as Wills and supplementary and special needs trusts. You may prevent your child from getting valuable government benefits if you put assets in his or her name. Check eligibility for government assistance programs such as SSI, SSDI and IDEA. In sum, you should work with a local lawyer and financial adviser because laws and resources vary from state to state. Several new organizations make it easier to find special-needs planning experts, many of whom have disabled children themselves and can help you navigate the benefits system and find local resources.