Financial Planning For Kids With Special Needs
Category: Estate Planning
From Forbes.com Financial Planning For Kids With Special Needs: "Many parents with physically, emotionally or developmentally disabled children have not secured the child's financial future, a survey conducted for MetLife found.
Sixty percent of parents don't expect their child with special needs to be financially independent, but 68% of parents haven't written a will, and 29% have done nothing to plan for the child's financial future.
Parents are aware of the need to make plans, but 66% say there is little financial planning information available that focuses on children with special needs. Surprisingly, 85% parents turn to their doctor for financial advice. "
A child with special needs requires special planning. Some questions to consider:
- Is the child mentally competent? If not, you may need to seek a guardianship after age 18.
- Does the child have his or her own money? Perhaps from a court settlement? If so, consider placing the funds in a (d)(4)(A) Special Needs Trust. This type of trust is authorized by federal statue to allow the child to have funds, yet qualify for state and federal program for people with special needs, including house and medical care. This is done by limiting trust distribution to the child's non-support needs, and requiring that any public dollars expended on the child's behalf be repaid from the trust at death.
- Will the child be inheriting money from parents or otherwise? Inherited funds should also be held in a carefully crafted trust so that the inheritance does not disqualify the child from any public benefits or programs. A trust created by a third party can have more flexibility in giving the assets to the disabled child, and do not need to have the pay-back provision of a (d)(4)(A) Special Needs Trust.