Organizing Your Financial World Around a Child With Special Needs
There is some standard thinking about setting up your affairs with children who have special needs:
Families realize that they have to support these children for the rest of their lives. So, they typically write wills and take out significant term life insurance policies. They are careful to name a trust as the beneficiary, because if their child has more than $1,000 in assets upon reaching age 18, he/she will no longer be eligible for some government benefits.
However, while these families are indeed on the right track, parents with special needs children also need to:
1. Set up a second trust. The purpose of this additional trust would be so that friends and family members can contribute to the child’s care while the family is still alive–without causing the child to lose eligibility for federal disability benefits.
2. Increase savings. These families need a much larger emergency fund than most, and they also need to create a “reserve fund”. They should concentrate on savings–rather than paying off debt–especially if interest rates on loans are low.
3. Plan for three retirements. These families not only have to plan for their retirements, but also for the child’s long-term care. They should maximize their savings and take an aggressive approach with their portfolio to maximize returns over the long run.
I thought these tips were so important that if you find yourself in this situation, you should raise them with your professional advisors. And, of course, we’re here to help.
I’m holding my family closer this week. I imagine you are, as well. Let’s do everything we can for them, together, shall we?