While all parents worry about the well-being of their children, caring for a child or other loved one with a disability presents a unique set of emotional and financial challenges. You have far greater concerns than most concerning that day sometime in the future when you’re no longer around to care for your loved one with special needs. But you also need to carefully consider both the willingness and ability of other family members to assume both physical and financial caregiving obligations after you’re gone.
You may be so focused on putting away as much money as possible for your loved one’s future care that you end up neglecting your own retirement planning needs in the process. Fortunately, however, there are planning solutions designed specifically to assist in providing for your loved one with a disability—often this can be done through the use of a special needs trust.
The fundamental purpose of any special needs trust is to allow money to be put aside for the care of an individual with special needs while preserving his/her eligibility for federal and state needs-based benefits (e.g., Medicaid and Supplemental Security Income). These can be established in one of two ways:
First-party trusts are funded by assets owned by the individual with special needs.1 Perhaps there was a permanent impairment caused by negligence at birth, or maybe a subsequent injury that resulted in a settlement. Because funds received from legal settlements are often technically the property of the individual with a disability, first-party trusts provide access to those assets for purposes defined in the trust agreement, while still maintaining the individual’s eligibility for needs-based public benefits.
Third-party trusts, on the other hand, can be funded by anyone other than the individual with a disability (e.g., parents, grandparents, other relatives, fundraisers, or friends) and are typically used for estate planning purposes—as a means of efficiently transferring assets for the long-term care needs of a loved one with a disability. These also serve as a mechanism to provide funding for purposes defined in the trust agreement (such as continued care or quality of life purposes) without adversely impacting needs-based government assistance eligibility requirements.
Putting a Comprehensive Plan in Place
A special needs trust can make a huge impact on the beneficiary’s life; providing them with the ability to pay for important necessities such as specialized medical services and equipment, vehicles and transportation, home and auto adaptations, rehabilitation, personal care attendants and vacations and recreation. Given its importance, however, you want to assemble an experienced planning team to help you determine: Who’s going to take care of my special needs child when I pass away and how much is it going to cost? Working collaboratively, a life care planner, professional fiduciary, financial advisor, insurance specialist, and an attorney who specializes in this area of law can then help you explore the pros and cons of various types of special needs trusts. Together, you can assess whether or not you have the financial means to meet your funding goals, and if not, explore insurance options to close any gaps that may exist.
No one individual can completely serve the needs of someone with a disability. That’s why it’s important to employ a team approach that incorporates:
- Careful oversight, management, and reporting on the special needs trust assets
- Ongoing regular contact with those professionals involved with the care and oversight and the coordination of life management services
- Assistance in locating professionals experienced in identifying beneficial programs, advocacy, and support programs; and
- Serving as a liaison between the beneficiary, family members, service providers, vendors, caregivers, and other professionals.
The ultimate goal is simple: maximizing benefits for your child or loved one with special needs and improving their quality of life. But the achievement of those goals takes careful planning and continued oversight. And the sooner you get started, the sooner you can enjoy the peace of mind that comes with knowing they have a better chance for a secure financial future.