Recently, I gave a presentation with Kristen Lewis, an estate lawyer and co-chair of the Long Term Care, Medicaid and Special Needs Trust Committee at Smith, Gambrell and Russell LLC, to parents of special needs children regarding financial planning. We addressed the challenges parents face while living, as well as the estate planning necessary to ensure a child with special needs is provided for after the parents die.
Between the two of us, we had so much valuable information on what can be a sensitive and complicated situation, that we’re making two documents available as free downloads:
- Estate Planning for Families with Special Needs
- Five Steps to Financially Protect your Child with Special Needs
Steps to Financial Planning for a Child with Special Needs
The topics that these two handouts cover include:
- Building a team wisely. Establishing the financial structure that will best benefit your child requires building a team that includes your attorney, financial planner, and accountant. Beyond these financial experts, you may also need to consider a life care planner or care manager , a life insurance specialist, a government benefits specialist and claims processor, a special needs advocate, a special education expert, a home accessibility specialist, and a therapist. You’ll read more about what each of these contribute and why your team must understand the nuances of your situation.
- The importance of educating yourself. Your team needs to communicate with you and be willing to educate you. To maximize the benefits for your child, it is critically important that you be educated about the financial plan and how everything works together.
- Understanding how special needs trust and planning interact with investing. When developing an investment plan, you and your financial planner both need to be aware of how special needs planning impacts the overall asset allocation between cash, fixed income, and equity. Your financial planner also needs to recognize that the life expectancy of a special needs child is typically no different than anyone else
- The silent threat of inflation. Inflation creeps in so slowly that you don’t initially notice its impact. However, if your financial plan doesn’t have a strategy for combatting inflation, your child will not have as much money in the future as you expect. The download explains why.
- Basic money management and trust strategy. When you discuss the assets that go into trusts, there will be three options: cash, fixed income and equities. Cash provides the security you need during the ups and downs of equity, while fixed income provides smaller but safer returns. Because each one serves a purpose, the download will help you understand their differences and benefits.
- Using Special Needs Trusts (SNTs). In most cases, SNTs will serve as the foundation of an effective estate plan designed to maximize the options available for those with disabilities. Properly drafted SNTs can supplement, not supplant, any means-tested government benefits for which the beneficiary is otherwise eligible as a result of his disability. The handout discusses why disinheriting the beneficiary with special needs is an outdated and incorrect approach.
- Knowing the difference between government benefits that are “means-tested” and those that are based on a worker’s employment history. SNT must also be coordinated with employment-based benefits (e.g. Medicare and Social Security Disability Income, which typically derive from the work record of the beneficiary’s retired, disabled or deceased parent). The download also explains the difference between a “first-party” and a “third-party” SNT and why most families must establish both types of SNTs as part of an effective plan
Selecting trustees, coordinating beneficiary designations for non-probate assets, and allocating assets to fund SNTs are among the additional topics covered in the downloads.
Taking Financial Control to Protect a Child with Special Needs
I recognize that there are many other details to take into account when structuring a financial plan and estate for your special needs child. However, by starting with these downloads, you are on the path to developing a plan that will put you in control of the situation. And with so much in the world that we can’t control, knowing that you’re doing what you can to manage your child’s financial future is a huge achievement.
Everyone’s situation is different. If you’d like to discuss any questions or concerns you have, please contact us for a no obligation consultation to see how we can help.
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David Ragland, a certified financial planner and CEO of IRC Wealth, is also the Board Chair of the Kyle Pease Foundation, which creates awareness and raises funds to promote success for persons with disabilities by providing assistance to meet their individual needs through sports.
Kristen Lewis is an estate lawyer and co-chair of the Long Term Care, Medicaid and Special Needs Trust Committee at Smith, Gambrell and Russell LLC in Atlanta.