Normally when preparing an estate plan, the conversation between advisor and client tends to focus around how to efficiently transfer assets between generations, whether there is enough money to pay estate taxes (if that is an issue), and other issues. However, for families with a special-needs child, the planning process has many more added elements that must be addressed. Many special-needs children will be financially dependent on others their entire lives, so it is essential to have a plan in place that protects their long-term financial well-being and those of any other dependents. The following are some strategies to consider:
Begin the conversation
During the creation and review of your estate plan, it is important to identify what goals are trying to be achieved with the estate plan. Some families want to split any inheritance equally among all children. Other families might like to leave more, or less, money to a special-needs child if they are considering benefits like Social Security or possible lawsuit settlements.
Discussions with appropriate family members, financial advisors, doctors, and attorneys may help you come to a decision that is right for your situation. In addition, a discussion about the type of care necessary, how it will be paid, who will be responsible for administering it, and more, should take place at this time.
Protect your child’s assets
A common strategy to care for a child with special needs during his life, and after the parents are deceased, is the creation of a Special Needs Trust that could provide for special needs dependents for as long as they live. This is often preferred rather than leaving money directly to the dependent or to another family member to care your child.
Leaving money directly to a special-needs child may put him at risk of losing eligibility of government benefits. If he is considered to have too many assets, it’s possible he won’t qualify for benefits such as Supplemental Security Income or Medicaid.
A trust provides the vehicle in which a family can set aside funds specifically for the care of the special needs dependent. Many people with special needs are eligible for federal Supplemental Security Income, and may also qualify for other need-based federal, state, or local programs. The right type of trust, created properly with the help of an experienced attorney, can help ensure that any inheritance or other assets won’t disqualify your dependent from any available government benefits.
Review your plan regularly
Estate plans need to be reviewed and updated over time to keep pace with tax law changes and changes in people’s lives and financial situations. It is important for every family to review and update their estate plan, but it is especially important for families with special-needs dependents.
Often, the condition of a special-needs child will change over time. Consult your financial advisor or attorney about how to make your plan flexible enough to make changes based on the changing specifics in your life.
A good rule of thumb is to review your plan every three to five years, or whenever there are any major life events like a birth or death in the family. Doing this will increase your confidence that the best interests of your special-needs child are taken care of.
Anthony N. Corrao is an independent advisor with Corrao Wealth Management. For more than 25 years, he has helped families with their financial goals by developing financial, educational, and retirement planning strategies. He can be found at www.corra
Securities offered through First Allied Securities Inc., a registered broker dealer. Member FINRA-SIPC. Advisory services offered through First Allied Advisory Services, a registered investment adviser. The information is intended for informational purposes only, and is not intended to be a substitute for specific tax, legal, or investment advice.
