Planning for your child’s financial future can be complicated, particularly if your child has special needs. While some children with special needs will grow up to become adults who can look after themselves and make their own financial decisions, many will need a legal guardian and a financial plan to protect them.
It may be difficult to think about the time when you and your spouse may no longer be able to care for your special needs child, but it’s imperative that you put legal and financial protections in place to ensure your child’s happy and financially secure future. Here are the tools you will need to protect your child’s finances for years to come:
Setting up the legal protections to take care of your child is not something you can do on your own. You will need to consult with a lawyer who truly understands the complexities of providing for a special needs child and adult. Lawyers who have devoted themselves to helping parents create Special Needs Trusts (SNT) will often call themselves special needs planners. The National Alliance on Mental Illness can help parents to find one of these special needs planners, so that parents can start the process of creating an SNT.
A Special Needs Trust
Special Needs Trusts are much like living trusts, in that you can use this arrangement in order to specify how your assets will be used, both before and after your death. Basically, parents creating an SNT would transfer assets over to the trust, to be held for the use of the beneficiary: your special needs child. No matter what happens to you and your assets — whether you go through a divorce, a lawsuit, or even have your will contested after your death — the assets in the SNT cannot be touched and will continue to be available for your child’s use.
These trusts also ensure that your child will still qualify for government assistance programs, including Supplemental Security Income (SSI). This program provides special needs adults with a monthly stipend for basic needs, although it does not cover any special therapies, programs, or enhanced care that your child may need. In addition, SSI is only available for individuals who have less than $2,000 in assets. The trust you set up will ensure that there is money available for your child’s needs, while still legally keeping her assets below the disqualifying $2,000 level.
You can fund your trust any number of ways. If you are struggling financially, you can plan to use your estate and life insurance proceeds as the main method of funding of your trust. However, it is also a good idea to place money in that trust throughout your lifetime, so that if you were to die unexpectedly, there would be no wait to provide any necessary money to your child. In addition, it is important to remind family that any large amounts of money given to your child should be given directly to the trust, so that your child’s assets do not exceed $2,000.
A Trustee and a Guardian
Every trust must have an individual who is responsible for allocating money to the beneficiary – in other words, a trustee. You can be the trustee of your SNT while you are living, as the funds in this trust can be used at any time. You must designate a trustee to take over in the event of your death, though.
In addition to the trustee, you will need someone who will take over as guardian of your child, both when he is a minor and potentially when he reaches adulthood, in the event of your death. If you know your child cannot take care of himself after age 18, you also need to make sure that you have appointed yourself as your child’s legal guardian so that you can continue to make decision on his behalf.
Erika Plank Hagan, mother of two boys—one of whom has Autism — suggests splitting up the appointed guardian and trustee duties, so that no one person is in charge of everything. She states, “My parents would have the kids, and my husband’s parents would be in charge of the money. While we trust both sets of parents, it seemed smart to set it up so no one could run with the money and not use it for Isaac. We figured that even if something happened to the money, then at least someone else would still be in charge of Isaac and still qualify for help from the government as his legal guardians.”
The decision as to who will be your trustee and who will be your child’s guardian — both before and after he reaches adulthood — is one you will sometimes need to revisit, depending on family status, unexpected changes in health, and other possible issues.
The Bottom Line
Your child needs you to plan ahead for the inevitable changes in your lives. It’s one of the greatest gifts you can give her.