Retirement planning and special needs planning are not mutually exclusive.
Yes. You can plan for both the future of your special needs child and your retirement years.
It will take attention to detail, but it can be done.
First, you should know your child will likely outlive you.
According to a recent MarketWatch article, titled “Parents of special needs children plan for two futures,” the National Down Syndrome Society announced the life expectancy of people with Down Syndrome has increased from 25 to 60 since 1983.
Also, there will be about 1.2 million adults with developmental disabilities age 60 or older in 2030. This is almost double the size of the same demographic in 2000, according to 2012 research by the University of Illinois at Chicago.
To start, prepare for your own financial security.
Set up and take advantage of retirement accounts, especially if your job offers a 401(k).
You will also need to prepare for your own health care needs.
Consider getting long-term care insurance when you are 50.
You are more likely to have paid off major expenses (i.e. college tuition and mortgages) and are likely to still be in good health.
Concerned about funding?
A health savings account (HSA) may be a viable option.
If your life insurance premiums or long-term care expenses qualify, you could use an HSA to fund them.
Why use an HSA?
They are advantageous when it comes to taxes.
When money is deposited into one of these accounts, it is not taxed.
It can then grow tax-deferred and can be withdrawn for qualified medical expenses tax-free, making it a smart idea.
With your own financial and care planning in place, you should then optimize your assets for your special needs child.
Most importantly, you will not want to disqualify your child from means-tested benefits when you save for retirement or leave your inheritance.
Create a special needs trust and name the trust rather than the child as the beneficiary for any inheritance.
You can also set up a 529 ABLE Account.
What does this do?
With an ABLE account, you can save up to $100,000 without disqualifying your adult child from government benefits like Supplemental Security Insurance and Medicaid.
It also allows family members to make the maximum annual gift exclusion to the account.
Overwhelmed with where to begin?
Meet with an experienced estate planning attorney to discuss your situation and your goals. He or she will be able to create the documents you need to care for yourself and your child.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: MarketWatch (July 7, 2016) “Parents of special needs children plan for two futures”