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:
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?
These questions and fears might stop you in your tracks. But financial planners
say that creating a plan can ease anxiety. Some of the issues you 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?
Here are 10 steps to planning your child's financial future. Some are simple, some
are challenging; some cost nothing and some require paying legal fees. Get started
on some of these now, so you'll have peace of mind down the road.
1. Create a Special Needs Trust
A special needs trust is the most important part of your child's long-term financial
plan. This is where you can put money that you save, that others give your child as
gifts, or that you receive from an insurance settlement without worrying that these
funds will interfere with your child's eligibility for federal benefits like Medicaid
and Supplemental Security Income (SSI).
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 your 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 SSI.
2. Write a Will
A will 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 above). The will
is also where you can specify a guardian who will take care of your child.
When you have a child with special needs, a will should not be a do-it-yourself
endeavor. Hire a lawyer who works specifically for people with special needs and is
aware of your state's disability laws. Once the documents are drafted, have your lawyer
keep one and then give copies to any executors or guardians named in the will.
Costs for this legal paperwork, including the will, trust, and powers of attorney,
start at $1,500 and go higher depending on where you live. Contact the Academy of
Special Needs Planners or the Special Needs Alliance for a referral to an attorney
in your state.
3. Name a Guardian
A guardian is the person who will care for your child if you were to die before
he or she becomes an adult. In choosing this person, consider how much time you now
spend tending to your child's needs. Who can handle that type of commitment? Who has
bonded with your child? Who has the patience, understanding, and other personality
traits necessary to deal with the day-to-day responsibilities of raising your child?
Once you pick someone, ask the person if he or she can and will accept that responsibility
(even though you hope it will never be necessary). And talk about how this commitment
will likely stretch beyond when your child turns 18.
4. Name a Trustee
A trustee is the person who will be responsible for managing the special needs
trust after your death. It can be a family member, a friend, an independent professional
trustee, or even a bank or lawyer. The trustee ensures that the money in the trust
is spent only on your child with special needs and only on services that you've specified
or that are appropriate to your child's needs. The trustee also supervises how the
money in the trust is invested. The person who is caring for your son or daughter
(the guardian) cannot spend any money in the trust without the trustee's approval.
And a word on trustees and guardians: They often are not the same person, and some
financial advisors recommend that they never be the same person. By separating these
roles, you ensure a "checks and balances" system for your child's future needs.
5. Build Your Savings
Parents of children with special needs quickly learn that just because a child
needs a certain treatment or therapy doesn't mean that your school system will offer
it or insurance will cover it. This is where personal savings become so important.
Start putting aside whatever you can each month — no amount is too small —
to cover these extra expenses. Just make sure you never put this money in your child's
Savings also can help pay for a special needs advocate, an expert in special education
who can help you navigate the paperwork, programs, and laws that affect what services
your child qualifies for. Special needs advocates can save parents money in the long
run by using their expertise to ensure that kids get all the services they're entitled
to from their local school district.
To find an advocate in your area, ask other parents for recommendations or contact
your local school district, organizations focused on your child's disability, or local
colleges with special needs programs for a referral.
6. Write a Letter of Intent
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. 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.
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.
And then once a year, update the letter. This is not a formal legal 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.
7. Plan for Your Child's Independence
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 start thinking: Will your child remain living with you? If so, will support
personnel be needed during the day when he or she used to be at school? Are day programs
for adults with special needs available in your area? If independent living is the
goal, start investigating options in your community such as shared living, group homes,
or apartments. Once you find a place you like, get on the waiting list if there is
8. Apply for Guardianship or Power of Attorney
Once children turn 18, they're considered adults in the eyes of the law. This gives
your child the right to make medical and financial decisions. If he or she is not
capable of this or needs your guidance, consider assuming legal guardianship or the
less-restrictive power of attorney and health care proxy for his or her financial,
legal, and health care affairs. This way you maintain the same supervision and control
you had over these as you did when your daughter or son was younger.
Experts advise parents to hire an attorney to help with this process. This will
ensure that you have all the powers you would need to assume control of your adult
child's health care in the event of an emergency. If your child cannot or won't consent
to you assuming power of attorney, the matter will likely be decided before a probate
9. Educate Family Members
Grandparents, aunts, uncles, and other loved ones might want to help out with expenses.
But explain to them the importance of not putting anything 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. The same goes for
gifts of savings bonds, stocks, or cash: nothing should ever be in your child's name.
And if your son or daughter will not attend college, there is no need for a 529
savings plan. Those funds can only be used for post-secondary education, not private
schools, tutoring, or therapies needed before age 18.
If loved ones want to leave something to your child, they can. But tell them to
name the special needs trust as the beneficiary to ensure that your
child holds no assets of his or her own.
10. Need Help? Find an Advisor
If all of this is too overwhelming, a certified financial planner or special needs
financial planner can help. Ask your human resources department if your company offers
this service as part of your benefits package. Or check the Academy of Special Needs
Planners or Special Needs Alliance websites for a referral to a professional in your