Parents of children with special needs may not think about establishing a special needs trust early in their child’s life, when short-term focuses are the priority. Eventually, however, concerns for the future may seep into daily life.
"The concern is, what will happen to your child when you are gone?" shares Michael, the father of a 23-year-old son with CHARGE syndrome. "You begin to think about how your child with special needs will likely need more money for their care and well-being long term than your other children, as they won't have the earnings potential of your other kids."
In addition, "you want to ensure they are taken care of so that they can lead full and happy lives when you're gone, and so that their long-term care is not a financial burden on their siblings that will eventually care for them," he adds.
"The concern is not only who will care for your child, but will they be able to handle the financial and personal responsibility of an adult who will not be able to live independently? This can lead to some tough discussions with siblings."
Aaron Terry is a trust and fiduciary specialist and vice president with Wells Fargo Private Bank. He shares some basics of financial planning for a child with special needs.
Terry says the most common mistake he sees is when a couple hasn’t developed a comprehensive plan. "Not getting the right documents in place and not having the trust set up properly to pay attention to other assets, like life insurance and retirement benefits," he shares. "Anyone can draft a special needs trust, but if you don’t understand the different laws, you can really mess it up."
According to Bill Frazier, senior vice president of the Special Needs Trust Group for SunTrust Bank, there are two common mistakes that parents make when planning for the financial future of their child with special needs. Frazier says, "Families often don't research and understand the full array of techniques available when planning for loved ones with disabilities, which can result in poor planning." He also says that parents typically don't realize the number of people who should be involved in the planning process.
According to Frazier, "Parents should seek out and discuss their circumstances with several professionals so that they can work together to form a plan with the best likelihood of achieving their goals."
He suggests that these professionals include:
Don’t think you have to be wealthy to establish an effective trust. In fact, if something happens to a parent, often life insurance will go into effect and fund a trust.
"Whether it’s a trust for $1 million or $250,000, it’s worth having the documents done," Terry says, "to make sure the individual who has the special needs trust is protected from predators and their government benefits are protected."
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