As a fiduciary financial advisor who works with families who have loved ones with special needs, I often hear comments about not knowing where to begin when it comes to financial planning. This may be why only 25% of these families have created a special needs trust, and 50% haven’t yet identified a guardian for their loved one. This kind of planning may seem overwhelming, but it’s really not when you take one step at a time.
Let’s start with the foundation – public benefits for your child. In my opinion, regardless of how much money you have set aside in savings, when you have someone who is considered ‘special needs’ and you qualify, you should have Supplemental Security Income (SSI) and Medicaid. Some of the most important benefits go beyond monetary and healthcare. In Ohio there are Medicaid Individual Option (IO) waivers that allow access to programs and resources only available to recipients. These programs have income and asset restrictions. For example, the cash value of a life insurance policy may be counted as an asset. Fortunately, there are legal trusts available to allow people to receive these benefits while also having other resources available for supplemental care costs.
Most states allow two different types of trusts for special needs planning:
- Third-Party and First-Party trusts. The Third-Party Trust is funded with assets that belong to someone other than the beneficiary of the trust (the person with special needs).
- A First-Party Trust is funded by the personal assets of the person with special needs. This First-Party Trust is often called a Payback Trust because this trust may have to repay Medicaid when the recipient passes.
- The key to properly structuring trusts is to find an attorney who specializes in this area. In my world not all attorneys are equal and a good portion of the work done by the special needs attorneys I know is fixing attempts at special needs trusts.
The Department of Health and Human Services, found 10.2 million U.S. children have special healthcare needs, or 14 percent of all U.S. children.
The tougher part is the personal decisions families must make as evidenced by only half of them identifying a guardian. This is not an easy decision as the person who may be great with your child may not be great with the paperwork to keep the benefits in place, or vice-versa. Or, what if you pick someone who isn’t local and it means your child will have to move? I encourage parents to sit down and write out who may be the correct guardians. Once you have agreed on a potential guardian have them spend a weekend together to see if it works. Odds are at some point your child will live without you. Wouldn’t you prefer to know ahead of time if your guardian choice fits?
The other main topic is communicating your child’s instruction manual. All parents know those items that make our children themselves. It is critical when you have a child with special needs to document those items and share it. For example, does everyone know your son prefers Billy over William? Additionally, I am sure you keep track of medicines your child is on, who their doctors are, what they like to do for fun and more. There is probably also a list opposite of this that spells out doctors, medicines, and more they can never be exposed to again. Sharing all these items that make your child who they are is critical in structuring the proper plan for your loved one with special needs.
I could write lots more on this topic. However, I want to give you a quick overview of some of the most important things I see families who have loved ones with special needs dealing with on a regular basis. Developing a plan for your child is important, it is tough, and it is not impossible. Please know it will take time and there are qualified professionals who can help guide you through this planning. Being an Ohio State grad I know that IO stands for Individual Option waiver and is a lot more than simply an answer to the Ohio State cheer that begins O H. Make sure your advisor does too.
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