You are asking the right question, as rearing a child with special needs is expensive by anyone's count.
But I am not telling you anything new, am I?
The New York Daily News recently took up this timely topic in an article titled "How to prepare a financial plan for families with special needs children."
According to the article, experts estimate that rearing a child without special needs to age 18 costs roughly $250,000. However, if you are rearing a child with special needs, then you can expect costs to reach 10 times that.
Yikes!
Given these financial challenges, the article recommends the following key focus areas to both protect and grow your money:
Assemble a team of experts.
Who should be on this team?
That team should include an elder law attorney, doctor, accountant, and government benefits specialist to help you understand Social Security, Medicaid, and other state and federal government programs. To this I would add a life insurance professional.
Draft a letter of intent.
Think of this letter, which you may revise from time to time, as practical instructions and insights into your child's history, medical needs, doctors, allergies, likes and dislikes.
This letter can be an invaluable resource to guide and direct your child's future trustee and guardian.
Draft a will.
In Kansas and Missouri, your will nominates the "backup parent" (i.e., guardian) for your child and also allows you to determine how his or her inheritance is administered.
Create a Special Needs Trust (SNT).
You have not done this yet?
Without delay, get this key legal instrument drafted and inked without delay.
Whether created under your will, revocable living trust or as a standalone trust, the SNT will serve as a separate entity to hold the inheritance for your child so he or she is not disqualified from assistance programs because of the inheritance.
Yes, this gets complicated.
Create a plan for building assets.
The key for building assets for your child with special needs is that special needs trust.
While setting up a special needs trust can be a fairly straightforward process, the laws surrounding special needs trusts are rather complicated.
Do not try this on your own. It is not an appropriate DIY project.
Consult an experienced elder law and special needs trust attorney.
Once the special needs trust is in place, make certain there is a financial mechanism to continue to provide your child with the highest quality of life possible.
Life insurance is the perfect financial tool.
Why?
Because only life insurance can instantly create an "estate" even if you do not live long enough to build one by hard work, savings and thrift.
Period.
Just completing the SNT and funding it with life insurance (especially "permanent," not term insurance) can take a huge weight off of your shoulders.
Unfortunately, many parents wait until it is simply too late, or they leave money directly to their child.
This makes everything that much more complicated.
Who should be the trustee under the SNT?
Great question.
Obviously, selecting the future trustee is a matter of determining who will be the right person for the job.
And it may not be the caregiver.
Some special needs trusts use professional trustees or pooled trusts, which are administered and managed by non-profit organizations.
Special needs require special planning.
As stressed by the original article, you should work with your team and your family to establish a legal and financial climate to help you raise and provide for your child.
Once created, this will offer you peace of mind in protecting and caring for your family and 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.
Reference: The New York Daily News (April 1, 2016) "How to prepare a financial plan for families with special needs children"
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