Financial Planning for Special Needs Children

About 20 million American families include children with special needs*. While raising a child with a disability obviously impacts daily life, special considerations must be made for the future as well. The expenses faced by these families often greatly exceed their peers, as financial support and daily assistance make an enormous impact on their budgets. For example, it has been estimated that the lifetime cost of caring for a child with autism amounts to about $3.2 million*.

When planning for the future, families with a special needs child may need to set up a special trust in order to endure the child’s needs will be met. The type of trust established will of course depend upon the needs of the child, and the reasonable expectation that they either will or will not be able to manage their own money in the future.

A special-needs trust allows financial assets to be passed on to a disabled family member, without affecting their eligibility for certain government programs like Medicaid and Social Security. Since these programs have strict guidelines for eligibility, placing assets in a trust prevents them from being counted as either assets or income. Without such a trust, a sudden inheritance could disqualify a disabled individual from medical insurance or monthly income that they really need.

If assets are not placed in a trust, and a plan carefully crafted with the child’s best interest in mind, the courts will be forced to make decisions regarding finances and care for the special needs child. Most parents would prefer to make these decisions themselves, as they know their child and his or her needs better than anyone. If a trust is properly established, it will remain private and pass directly to beneficiaries when the time comes. Expensive and time-consuming court proceedings can be avoided, and the care of the child does not have to be interrupted.

There are a number of intricate rules and regulations concerning trusts. In order to protect the beneficiary and reap the maximum amount of tax benefits, careful consultation with a financial advisor or legal team is necessary.

*, September 28, 2012

Securities and Advisory Services offered through Client One Securities, LLC Member FINRA/SIPC and an investment advisor. Sawyer Wealth Management and Client One Securities, LLC are not affiliated.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.