Financial Planning for Children with Special Needs

Financial Planning for Children with Special Needs

In Asset Allocation, Estate Planning, Personal Financial Planning by Chip Hymiller

Parents with special needs children can face a unique set of financial challenges.  However, like all financial challenges, it is important to take measures early to financially prepare for the future.  Here are a number of financial planning ideas and considerations for those parents who have special needs children.

Plan for yourself

It is important that you carefully consider your financial planning needs.  Make sure that you have adequate disability insurance and long term care insurance.  Doing so will ensure that your family is not financially strained should you become disabled or require long term care.

It is also important to develop a savings and investment plan that will adequately cover your current and future cash flow needs.  Your savings strategy should embed flexibility to cover both long term financial goals and unexpected short term expenses.

Avoid investment products that have “exit” fees or sizable surrender penalties, while taking advantage of accounts that can serve as “dual purpose” savings accounts like Roth IRAs and personal brokerage accounts.  These accounts can play an important role when unexpected expenses arise.

Consider your child’s short term and long term financial requirements

Financial planning for a special needs child will depend on the severity of their condition, as well as their long term prognosis.

Planning financially for those children who will require lifelong assistance will require more extensive planning than for children who can ultimately become independent.  It is important to quantify these needs, formulate a strategy (savings or insurance) to meet these needs and systematically monitor progress over time.

Realistically plan for the cost of care

Children with special needs may require outside assistance from therapists and other specialists that can be costly and may not be covered by insurance .

It is important for parents to consider these costs as they make financial choices in other aspects of their lives.  House size, the frequency of buying new cars, the size of family vacations and other budget-related matters can have the effect of diverting money away from the accumulation of funds that may be much needed in the care for your child in the future.

Carefully address estate planning matters

While all parents with dependent children need to think through estate matters, the estate planning process for parents with special needs children can be especially challenging.  The difficult task of deciding on a guardian to take care of your child, or a trustee to manage your child’s assets should you pass away, becomes even more complex for parents of special needs children.

It is also important that your estate is structured such that your death does not unintentionally cause your child to become ineligible for certain government funded programs and benefits.  Working with an estate planning attorney who has experience in this area is a must.

Those parents who have children with special needs have a distinct set of financial challenges.  We believe that by approaching these challenges proactively, it is possible to create solutions that can provide families with peace of mind.

 


What is a Special Needs (or Supplemental Needs) Trust?

A Special Needs Trust is often utilized to protect the inheritance of a family member with a physical or mental disability or chronic Financial Planning for Children with Special Needsillness.  This type of trust provides for the management of financial assets in the trust and is drafted in such a way whereby trust assets are not considered “countable assets” for the purpose of qualifying for certain governmental benefits.  In addition, trust assets are generally not subject to creditors in the event the disabled beneficiary is sued or involved in a lawsuit.