Careful Planning: Arranging for Long-Term Support of a Special Needs Child
Note: Some of the information included regarding funding is relevant for our American readers only. Australian readers can visit www.ndis.gov.au for more information about funding options for Australian familes.
Parents who have a special needs child are the sole managers of their dependent’s personal and financial affairs, a role they often needs to be extended beyond their child’s 18th birthday depending on the severity of the disability and level of need. That role includes coming up with a future care plan should one or both parent die unexpectedly or become unable to continue providing care.
It’s a difficult responsibility because it means weeding through a daunting pile of information about government programs and relying on the continued presence of those resources well into the future. A financial planner or tax expert can provide valuable advice and guide you through the details and pitfalls, but parents should have a good general understanding of what to do and what options are available to them.
Seek out the assistance of a support group, which should include a financial counselor who has expertise in special needs issues. The make-up of your support team may vary based on your child’s needs and your circumstances, though in general it should include a lawyer, your child’s therapist (or therapists), and someone close to your family who can help look out for your needs in light of other expenses, such as a disability ramp. According to Home Advisor, most homeowners spend an average of $1,750 to have a disability ramp built.
Prepare your will
The disposition of your estate is an important step and one that should be taken carefully. Many people confidently leave their assets to a special needs child, knowing how much that money will be needed in the future. However, your will needs to be written with government regulations and tax laws in mind where your child is concerned. For example, if he or she receives assets of $2,000 or more it means disqualification from federal assistance, a vital source of ongoing aid. Discuss the ramifications of passing assets onto your child with a lawyer before finalizing your will.
Special needs trust
A special needs trust allows parents or guardians to make provisions for a special needs child that won’t disqualify them from federal aid. The money must be used to support a child’s quality of life and can help supplement government aid. It’s an agile resource and contributions can be made gradually, or the trust itself may be named beneficiary of a life insurance policy or inheritance.
Coordinate with friends and family
The danger of losing federal assistance over the $2,000 special needs dependency asset rule is clear enough to parents when making their own last will and testament. But it may not be evident to friends and family members who want to name a special needs friend or relative as a beneficiary. Talk to people who are close to you, those with assets that could go to your child. If they’ve named your child as a beneficiary, ask them to leave assets of $2,000 or more to the special needs trust so your child’s right to federal assistance is protected.
For people who want to avoid the cost of establishing a special needs trust (which can cost up to $3,000), the ABLE, or 529A account, is similar to a 529 education savings account in that anyone can contribute. The funds are available tax-free so long as they are used for quality-of-life-enhancing purposes. There are some negatives that should be considered, though. Total yearly contributions are limited to $14,000. Contributions to the 529A aren’t tax deductible, and after the dependent passes away the money can be absorbed by Medicaid.
Plan carefully when making long-term plans for your special needs child. Seek the advice of people who have an extensive body of knowledge when it comes to special needs financial planning. And always bear in mind that there are complications to distributing assets after you’re gone.
Courtesy of Pixabay.com.