Making plans for your own incapacity or death can be challenging enough. But what if you have a disabled or special-needs child? Many will be dependent physically and fiscally on others for the rest of their lives.
Here are a few tips on how to ensure your child receives the care they need after you’re gone.
First, assemble your team. This includes key family members or friends, financial planners, attorneys and healthcare professionals. You’ll need input from them to figure out how you want to handle the division of your estate among your heirs. You’ll also need to determine who will care for your child, and what kind of care they may need.
Second, gather records. Document all your accounts, including usernames and passwords. Make copies of your child’s medical records. Share these details with a trusted family member, friend or professional.
Third, review available options for providing the necessary financial resources. Below are three to get you started:
Option 1: Create a Special-Needs Trust
Many advisors recommend creating a special-needs trust for your child. This may be better than leaving money to them or other family members. Why?
Some people with disabilities may never be able to handle their own finances. Or an unethical financial professional may exploit them.
A special-needs trust may relieve siblings or other family members from feeling obligated to act in a caretaker capacity. This is especially important if they are not prepared to step into such a role.
A trust can help you avoid putting your child’s eligibility for federal and other benefits at risk.
Another plus: special-needs trusts are not subject to the probate process.
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Option 2: Buy a Life Insurance Policy
Life insurance is another attractive option for providing for your special-needs child. One possibility is permanent life insurance—but that can be expensive.
A second-to-die life insurance policy is also worth considering. Premiums tend to be more affordable (and cheaper than permanent life insurance). These policies also offer many death benefits.
If you plan on buying life insurance, make sure to name the special-needs trust as beneficiary. If your child is the direct beneficiary, they may not be able to get Supplemental Security Income (SSI).
Option 3: Open an ABLE Account
Finally, look into an ABLE (Achieving a Better Life Experience) account. These are set up on a state-by-state basis. If your child became disabled before age 26, you may gift money to an ABLE account in their name without penalty. The current gift limitation is $14,000 per year.
Once you have your plan in place, be sure to review it regularly and update as needed. Your life and financial circumstances are bound to change over time. The health of your special-needs dependent may also change.
If you aren’t sure where to start, one of our financial advisors can help. An experienced professional can help you create the right estate plan for you and your child’s unique needs and situation. Get started by requesting a complimentary, no-obligation consultation today!