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A special plan in 7 steps
Planning for a special-needs child is complex. Go easy on yourself and hire experts to help you.
Families and finances

Planning for a special-needs child

Parents of children with special needs are faced with daily challenges. The take-it-one-day-at-a-time approach may work most of the time, but experts say these parents should pause to consider what may happen to their special-needs child if something should happen to them. Odds are good that many of these children will survive their parents.

Yet planning beyond their own lifetimes is a task that many parents have not gotten around to, according to a 2008 survey by The Hartford Financial Services Group. Some 62 percent of parents have no long-term care plan in place for their special-needs child.

Among parents with a plan, half said they plan to leave money directly to their child, and 58 percent name their child as a beneficiary.

Either of those plans could disqualify a child from eligibility for government benefits and services, which impose strict limits on the assets a beneficiary can have in his or her name.

Financial planning for a special-needs child can be tricky, but if you start with a good road map, you'll avoid costly financial mistakes and have peace of mind that your child will be taken care when you and your spouse are gone.

A special-needs plan
  1. Get the right experts to help.
  2. Start with a letter of intent.
  3. Draft a will.
  4. Understand government benefits.
  5. Establish a special-needs trust.
  6. Name a trustee and guardian.
  7. Determine how to fund the trust.
Get the right experts to help you
When Karen Greenberg's son Ricky was diagnosed with autism, doctors told her to plan for the likelihood that he would never hold gainful employment and that he would require financial assistance well into his adult life.

Greenberg, a Certified Financial Planner based in Delray Beach, Fla., says the advice from her attorney at the time was to leave her estate to her youngest daughter.

"As a financial planner, I knew that was very poor advice because contingencies like divorce and lawsuits could befall even the most diligent and protective sibling," she says.

After doing research at a law library, she decided to establish a third-party special-needs trust, also known as a supplemental needs trust, to provide for Ricky financially while protecting government benefits such as Supplemental Security Income and Medicaid.

She says the trust she established for her son is usually beyond the reach of creditors of the child and the parents and is not available in divorce proceedings if the child marries.

Ricky, now 21, lives in a group home in New York that is completely funded by Medicaid. Greenberg says it would cost more than $100,000 per year out of pocket otherwise.

Greenberg was fortunate in having a financial planning background, but the majority of parents are often in a quandary about financial planning for special-needs children. It's a good idea to get together a team of experts that includes a medical professional familiar with the child's health care needs and an attorney who is well-versed in the area of special-needs trusts and government benefits.

-- Posted: June 8, 2009
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