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Planning For Your Child With Special Needs

Kanan Sachdeva, Northwestern Mutual

One of the most challenging issues facing parents of a child with special needs is planning for their child’s future without them. Financial planning for families with a child with special needs often requires the development of a plan that honors the future needs of their loved one, with sensitivity to the rules regarding government eligibility for programs and services.  The child’s parents, grandparents and other relatives may desire to coordinate their planning to best serve the interests of the child. With ever-changing laws and legal procedures, it’s important for families to regularly revisit their financial plans to ensure their child with special needs is well prepared for the future.

 At the heart of this planning is the desirability to preserve the child’s eligibility for most publicly funded disability related programs. Maintaining eligibility for basic government programs can be vitally important, although sound financial planning will also take into consideration the fact that government benefits likely will not meet all the child’s needs.

Special Needs Trusts

Many families are unaware that the receipt of an inheritance may cause eligibility problems for the child. An inheritance worth as little as a few thousand dollars could disqualify an individual with disabilities from most federal benefits, such as supplemental security income (SSI) and Medicaid, as well as risk qualification under some state programs. This is an enormous loss for many, reports the National Information Center for Children and Youth with Disabilities (NICHCY), since critical services such as supported employment and vocational rehabilitation services, group housing, transportation assistance and personal attendant care could be jeopardized.

For this reason, an effective estate plan should include a special needs trust – a legal document in which the family leaves chosen resources, such as money or property, directly to the special needs trust, which  is managed by a trustee on behalf of the person with the disability.  The trustee is given absolute discretion to decide when and how distributions are made from the trust for the benefit of the trust beneficiary, thus ensuring that government benefits are preserved.   Grandparents and other relatives may also choose to designate the trust as the beneficiary of a portion of their estates.  There are several types of special needs trusts that serve different purposes and laws affecting trusts vary from state to state. It is imperative that the family work with a knowledgeable attorney and a financial professional in creating and maintaining a special needs trust.

Funding the trust

Building a proper roadmap for all of the family’s financial goals and objectives is extremely important.  For some families funding a trust may require a reallocation of the assets they already have, while others may seek to ensure that there are additional funds available for their child upon the death of the primary caregivers. For many families, permanent life insurance is the solution. By naming the special needs trust as the beneficiary of a life insurance policy, the family can rest assured that the trust will be funded with the resources necessary to provide for the future financial needs of their loved one with special needs.

Planning considerations

There are important considerations parents can make when planning the financial future for children with special needs. Here are a few suggestions:

• Prepare, review and revise legal documents. Parents should regularly monitor legal documents such as wills, trusts, power of attorney documents and healthcare proxies to make sure they are relevant and properly worded.

• Develop a clear vision of how you want your child to live if both parents are no longer around. The family’s planning efforts should reflect their hopes, dreams and aspirations for their loved one.

• Develop a written Letter of Intent that will assist future caregivers.

Having a blueprint that provides vital information regarding the child’s physical and mental status, likes and dislikes, medications, history, etc., will be invaluable to future caregivers… and the child.

• Surround yourself with a team of knowledgeable professionals who have experience working with families with special needs. Core members of this team should include an attorney, a social worker and a financial professional. Together this group can help you manage the legal, government benefits, and financial solutions for your loved one with special needs.

• Provide funding for quality of life for a lifetime. Special needs trusts should be regularly checked to make certain that they are adequately funded for quality lifetime care and quality of life.

Resources for parents

There are many government and non-profit agencies to contact for more information on planning for the financial future for dependents with special needs and related issues. Following are some starting points for identifying local contacts:

  • National Dissemination Center for Children with Disabilities  www.nichcy.org
  • Special Needs Alliance www.specialneedsalliance.com                   A resource to help identify local legal counsel with expertise in special needs
  • National Care Advisors  www.nationalcareadvisors.com Consulting firm that provides quality of life planning necessary to meet the challenges of living with special needs.

 Whether a family has substantial means or few assets, a young child or adult child with disabilities, planning for the financial future of a loved one is critically important. How parents and other relatives leave their assets after death may greatly affect the quality of life for their family member with special needs.

(Article prepared by Northwestern Mutual with the cooperation of Kanan Sachdeva. Kanan Sachdeva is a Financial Representative with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, and its subsidiaries. Kanan Sachdeva is based in Southborough, MA. To contact Kanan Sachdeva, please call (781) 248-8640, e-mail at kanan.sachdeva@nmfn.com or visit nmfn.com/kanansachdeva. )

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