7 Long Term Financial Planning Tips for Special Needs Children
When you are the parent of a special needs child, you worry about a lot more than just paying for their college education. Instead, you have to worry about such things as how you’ll pay for the special therapy that your child will require throughout his or her life, or how you’ll continue to pay for your child’s expenses even when he or she is an adult, as well as where they will live and who will look after them upon your death. These overwhelming fears can cause parents much distress, however by creating a financial plan, you can ease your anxiety. Here are seven simple steps to plan your special needs child’s financial future.
1. Design a Special Needs Trust
Creating a special need trust is the most critical component of designing your child’s financial plan for the long-term. It enables you to put away all of the money you save, what you receive from insurance and what your child receives as gifts from others without worrying that the funds will interfere with your child receiving Supplemental Security Income and Medicaid. Even if you aren’t able to put money into a trust, you should still set one up anyway, as this will allow you to make it the beneficiary of a life insurance policy and any estate proceeds. This will ensure that those assets get passed to your child when you pass away.
2. Create a Will
A will dictates what exactly will happen to your assets when you pass away. Through the creation of a will, you will ensure that assets are placed into the special needs trust you created and not straight to your child. If you do not have a will then a judge may name your child as the beneficiary, which could make him or her unable to obtain federal benefits. You may also specify whom you want as your guardian in your will. When your child has special needs, you should not craft the will yourself. Instead, hire a lawyer who specializes in special needs cases to help you. Bear in mind that the cost of the trust, will and attorney will likely start at around $1,500.
3. Build Up Your Savings
Parents who have special needs children quickly discover that even though a child needs therapy and treatment, that doesn’t necessarily mean that insurance or their school system will provide or cover it. This is why personal savings are so important. Start by putting aside as much as you can afford to part with every month, and take into consideration the fact that there is no amount that is too small. This will help to cover all the extra expenses that go along with being a special needs caregiver.
4. Purchase a Life Insurance Policy
If you don’t have enough savings to fund your trust than a life insurance policy can be the solution. Even if you have an estate to fall back on, a life insurance policy can be a funding source. A life insurance policy will provide your family with ease knowing that if something happens to you in the future, there will be a source of income for your special needs trust. Life insurance that is directed into a trust will also allow you to be flexible by giving your child adequate funding while still allowing you to direct money into retirement or a business asset. Life insurance is also a fantastic tool for those who want to leave a larger amount of money to their special needs child, and a smaller amount to their other children. In most instances, a term life insurance policy is recommended, however it is best to talk to a life insurance specialist to find out the best policy for your situation.
5. Apply For Power of Attorney or Guardianship
Once your child turns 18, he or she will be seen as an adult in the eyes of the state. This will give your child the right to make all of their financial and medical decisions. If he or she is unable to make these decisions or simply needs some help then you should consider taking on the legal guardianship or the power of attorney for his or her legal, health care and financial affairs. This will permit you to keep the same control and supervision that you had when your son or daughter wasn’t an adult.
6. Educate Those Around You
Aunts, uncles, grandparents, close friends and other loved ones may want to help you out with your child’s expenses. However, it’s imperative that you explain that they shouldn’t put anything under your child’s name due to the fact that money, even though given for well intended purposes, can end up causing your child to lose much needed government benefits. It may be beneficial to have a meeting and explain why no one can leave any assets to your child in their will or name them as the beneficiary of a life insurance policy. A better option would be to direct those assets to your child’s special needs trust. This is also the case for gifts of stock, cash or bonds—nothing should ever be given in your child’s name.
7. Plan Out Your Child’s Independence
When your child turns 16 it’s time to start thinking about where he or she will be residing as an adult. In most cases, your child will be ineligible for education services through the public school system when he or she turns 21 or 22. It’s imperative to start thinking about whether or not your child will stay in your house, and if so what type of support staff will be required while you’re at work.
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