Is Funding a Special Needs Trust a Guessing Game?

How do parents of children with special needs, whether that child is 5 or 35, predict just how much money their disabled child will need for their future comfort?  There are many variables to consider, including:  life expectancy; the rate of inflation; investment return; the amount of benefits the government will provide decades from now (although it is fairly safe to assume recipients of Supplemental Security Income (SSI) will never receive enough cash benefits to rise above the poverty level).

Luckily, special needs financial calculators are available free of charge to help you and your estate planning attorney or financial planner determine the cost of providing your child with lifelong support.  Just click on one of the following links to start the process:

Taking the Guesswork out of Funding a Supplemental Needs Trust

Step One:  Assess your child’s future capabilities.  This is more difficult if your child is still young.  Speak to your child’s medical professionals and ask for an evaluation of your child’s prospects, both short- and long-term.  If your child is already an adult, you will already have a better understanding of what his or her needs are now and might be in the future.

Step Two:  Take an inventory of what you already own.  Add life insurance policies, if any.

Step Three:  Identify current and future living expenses and future income sources for your special needs child.  Your disabled child may be able to earn income and contribute financially.  Consider the government benefits and support your child is already receiving or might receive in the future.  If your child is currently living with you, will that child be eligible for subsidized housing?  Will there be gifts and inheritances from other family members?

Step Four:  Place a dollar value on anticipated income and expenses. The online calculators use broad categories such as housing, transportation, medical care, education, or you can use more detailed lists within each category.

Step Five:   Calculate!  Using assumptions about the rate of inflation and your investment returns, you should now have a target to help you plan for your child’s future needs.

Working Towards Your Goal

Although many of these questions are very difficult for parents to consider, and very difficult to answer, beginning the process of planning for the future security of your loved ones will make you feel more secure now.

As always, if you have any questions about this post, please feel free to either call or contact me through  the contact or comments form.

How Life Insurance Can Help Your Special Needs Child

Many parents are concerned about how they can fund a supplemental needs trust, especially in these rough economic times.  Parents are also concerned about how their other children will feel if they divide their estate assets unevenly, providing more for their siblings with disabilities.  These siblings might have even more resentment if they end up being financially responsible after you are no longer able to supplement your special needs child’s benefits.  Children with autism have a normal life span and could easily need financial assistance until they are well into their 80s!  Additionally, they may need to pay for care that you are no longer able to provide, such as a care manager or help with cleaning and shopping.

Parents with a disabled child should consider buying life insurance to wholly or partially fund the special needs trust.  There are several types of insurance to consider.  Term life is the least expensive option, but the premiums increase each year as the insured (that’s you) gets older.  Since these policies need to be renewed, at some point these policies are typically dropped due to the steep increases in premiums as you age or experience health issues.  There are several types of permanent life insurance including whole and universal.  The least expensive option is known as survivorship or second-to-die life insurance.  This term policy is payable only upon the death of the second insured, when it is most needed.  It is best to consult a life insurance agent with expertise in this area.

If you have any questions about this post,  please feel free to call or drop me a line on either the comment or contact form.