How to Plan for Special Needs Children
Children with special needs require so much attention — managing their health care and navigating the social services maze. You want to ensure that your child's needs will always be met, but you may find it hard to make time to plan for their finances.
There are various ways to get the care your child is entitled to. For example, you probably will be able to deduct non-reimbursed medical expenses on your tax return. You are entitled to write off these costs after they exceed 7.5 percent of your adjusted gross income.
Think about advanced planning
However, there's a lot more to helping your child than standard tax breaks, and well-intentioned efforts can actually leave you in worse shape.
Sometimes well-meaning relatives give the disabled child so much money that they're ineligible for some benefits. You may have to help the child spend down the money and reapply for Medicaid and other benefit programs.
On the other hand, some people think they can help by disinheriting their disabled child and giving the money to a sibling who promises to provide for the child's future. But this puts enormous stress on the sibling and still doesn't guarantee that your child's needs will be met.
Set up a trust
What you need is a receptacle that accepts money earmarked for your child to be used to pay for amenities that government programs don't provide. Here's where a special needs trust comes in handy. You could make the special needs trust the beneficiary of your life insurance policies and retirement plans. You may alert relatives that they may want to do the same — to pay for extracurricular activities.
Name co-trustees — a family member or friend, plus a professional trustee, like a bank or lawyer — to choose investments and manage taxes. The trustees should be people you feel confident will be able to manage the trust for decades. The same goes for a guardian. Remember, special needs children can live to normal life expectancy, so plan for 70 or 80 years.
You will have to think about guardianship. At 18 years of age, your children automatically become their own guardians, regardless of their ability to manage their lives. If you don't apply for guardianship, you may not have the legal authority to make medical and other decisions for your child. Start the application process at least a year and a half before your child turns 18. Suppose your child is only moderately disabled and can serve as his or her own guardian — have a health care proxy so you can make medical decisions when your child is unable to.
At 18, your child's benefits also change — into adult services. Many school systems allow disabled children to remain in programs until age 21, but families need to track down a new set of benefits.
Of course, this can get complicated, and every situation is different. The key is to plan as far in advance as possible. Work with a local lawyer and financial advisor to make sure you can set up a viable, long-term plan.