Have you thought about these questions?…
What is going to happen to my special needs child in the future?
Who will take care of them when I am gone?
Will they be able to live on their own?
Most parents of special needs children have. If you have not, it is time to start thinking about special needs financial planning. I know it can be scary…or you may be worried. But the fact is none of us know for certain what the future holds. However, that does not mean that we should not plan for it. Trying to come up with a financial plan for your child can be challenging…and for a special needs child, it can be quite overwhelming! Yet, you have to start somewhere, so begin today! To make it an easier process for you, here are 5 tips for special needs financial planning.
Have a Plan and Establish Goals
We all know (or we should know) that having children with special needs requires financial planning. The most important tip in special needs financial planning is having a plan. If you do not have a plan, you will not know what your child needs for the future. The first step in having a plan is to set goals.
Ask yourself, what kind of life do you envision for your child?
Do you see them living independently?
If you need help brainstorming, you can download a Life Skills Flow Chart here. Once you set goals and are able to see a plan for your child’s future, it is now time to determine the cost needed to care for your child, whether they will be living independently or will need to be supported. Make sure to take into consideration governmental benefits they are receiving, other support from organizations and any current services. At this point, you should also start using a budget with extra savings allocated for your special needs child. You would use these funds for medical expenses, therapy costs, attorney or advocate fees, or anything else that may arise in the future. The next step in having a plan is to write a letter of intent indicating the specifics for your child’s care (i.e. schedules, behavior plan, contact information for doctors and therapists, family member roles). The purpose of the letter of intent is to outline any pertinent information about your child just in case you are not around. Writing down your financial plan and goals, having extra savings for your special needs child, and creating a letter of intent will put you on the right track for financial planning.
To reiterate, here are five simple steps:
- set goals for your child
- think about how they will reach those goals in the future
- determine the cost needed to take care of your child
- budget for special needs expenses
- write down specifics for caring for your child, called a letter of intent
Establish a Trust and Will
Once you have a plan, it is time to set up a trust and a will. The purpose of establishing a special needs trust is to have a place you can save money for your child (from yourself or other individuals), while preventing these funds from interfering with any governmental benefits they may be receiving (i.e. Supplemental Security Income and Medicaid). If you want to learn more about Supplemental Security Income and governmental benefits, click here. It is important to note that the trust can serve as the beneficiary for your estate and life insurance policy. You want to make sure that your child is not the beneficiary of your estate because this can make them ineligible to receive governmental benefits, as most states do not allow assets more $2000. In the process of setting up a trust, think about who will manage the trust after you are gone. This person is called the trustee and should be someone who is responsible and able to supervise how the money in the trust is allocated. After your trust is set up, write a will. In the will, you outline what will be done with your assets after you are gone. Wills are important because you assign your assets to the special needs trust, avoiding your child being named beneficiary of your estate if anything happens to you. (Remember if your child receives more than $2000, this can mess up their governmental benefits).
Think About Guardianship
Many parents wonder if their child with special needs requires a guardian. This is something that should be heavily considered and decided when you establish your plan and goals for your child, since some adults with special needs do not need guardianship. Here are some questions to ask when determining guardianship:
What is my child’s functional level?
What independent skills does my child have?
Is my child able to live independently?
Do they have an established support system?
If you determine that your child needs a guardian, then you can apply for guardianship once they turn 18. After you apply for guardianship, you should then nominate a guardian in the event of your death and put it in writing in your will. Additionally, to be on the safe side, most professionals recommend to name a standby guardian just in case the original person is not able to provide guardianship.
Learn About Tax Deductions
As I write this post, Tax Day is fast approaching. As families with special needs are preparing for their taxes, many do not know that there are tax deductions for special needs children. Learning about these tax deductions can save you money over time and you could use this money for your child’s future. For example, you can deduct medical expenses, legal expenses when related to medical expenses, therapy expenses, and costs if your child is following a special diet. There are also tax credits that can be applied if you qualify, such as Earned Income Credit, Child and Dependent Care Credit, and Tuition Credits. To determine if you are eligible for these deductions and tax credits, you should contact a tax professional.
Get a Team of Professionals
Are you a DIY (do-it-yourself) person? I know I am. I like to research and take care of things on my own. However, this is not the time for that. Special needs financial planning requires a lot of planning and can be quite complex. You want to make sure you have every step covered. So take the time and research specialized attorneys, financial planners, and certified public accountants to ensure that your child’s financial future is set.
I am sure that was a lot to take in, so here is a simple checklist to stay organized.
What steps have you taken to prepare for your child’s financial future?