Families with special needs children have unique financial and estate planning needs. Not only must they address all the traditional financial planning issues—like retirement planning and tax planning—but they also need to take extra steps to make sure that their special needs child receives the care they need for the remainder of their life. Below are five important estate planning steps for every special needs family.
1. Review and Update Your Existing Estate Plan
If you already have an estate plan, even if it's just a simple will, take the time to review it. Do your estate planning documents reflect your current situation and wishes? Now is also a good time to double-check beneficiary designations on life insurance policies and retirement plans. Once you have an idea of where things stand with your current estate plan, you'll have a better idea of what steps you need to take moving forward. While special needs estate planning can be fairly complex, there may be some basic things you can take today to put your affairs in better order.
2. Create a Special Needs Trust
A special needs trust (also called a supplemental needs trust) is an important component of a special needs financial plan. While you may think that leaving assets directly to your special needs child is a good way to provide for them after your death, this can actually create complications. If your child has more than a very modest amount of assets, they'll be deemed ineligible for government programs like Supplemental Security Income and Medicaid. A special needs trust is a way to provide for your child while retaining their eligibility for government aid. You'll need to work with an attorney and possibly a financial planner to determine how to set up and fund the special needs trust.
3. Choose a Guardian and Trustee
If you are your child's guardian, you will need to choose a person to fill that role after you are no longer able to do so. Once you've identified a person who could serve as your child's guardian, have a conversation with them about what that will entail. They'll feel better prepared when they do assume those responsibilities, and you'll sleep better at night knowing a person you can trust is there to fill your shoes.
You'll also need to name someone to act as your child's trustee. This shouldn't necessarily be the same person who will serve as guardian, since people have different skills, and a person who is able to care for your child may not have the skills to effectively manage a trust.
4. Write a Letter of Intent
A special needs trust covers the financial questions, but it doesn't address many other issues. A letter of intent (sometimes called a letter of instruction) is a way for you to communicate other important information about your special needs family member's care and lifestyle. It may include information about your child's doctors and medical history, level of independence, favorite foods, books and television shows, social life and support network, and employment information. Essentially, any information that isn't communicated elsewhere in your estate plan but that you feel is important can be discussed in a letter of intent.
There are different ways to organize your letter of intent. For example, you may include contact information for doctors and other support resources directly in the letter, or you may attach that information in a supplemental document. The most important thing is that you record the information and store it in an easily accessible place.
5. Hold a Family Meeting
Your planning will be more effective—and there should be less conflict—if you take steps to get everyone on the same page. Sit down with those closest to you—grandparents, other children, siblings, trusted friends and anyone else who may be involved in your child's care after you're gone—and explain your plan. Articulate your wishes clearly to reduce potential confusion. Explain that if anyone wants to leave assets to your child, those should go to the trust. Having this conversation may be emotional, but it will ultimately help everyone involved provide better care for your child.
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Estate planning can be a challenging process if you are a parent to a special needs child. Yet it is critical to ensuring your child's well-being after you are gone. Taking the time to create a comprehensive estate plan today will mean a better future for your child.