Special Needs Planning: Every Detail Matters

By Michael J. Searcy

Twenty-five dollars. That was the tiny amount that caused a friend’s daughter to lose the government benefits she was receiving for her special needs.

When you are a parent or caregiver to a child with special needs, navigating the system alone is a challenge. As hard as you try to do everything right, sometimes a small mistake can have lasting repercussions. In this instance, a friend set up an account for her daughter and paid a $25 fee to get the account started. She then transferred $2,000 into the account, the legal limit allowed in her daughter’s case, so they could manage her finances from this account. She was devastated to find out that the $25 had been reported as causing her daughter’s account to exceed her limit and therefore lose her benefits.

When it comes to managing finances that are impacted by special needs, it can be helpful to have an overview of the financial and legal concerns to consider.

Naming a Trustee

A trustee will control the child’s money in order to make responsible decisions and distributions to meet their living expenses and needs. This role can be filled by a parent or family member, trusted friend, or an institution. Because a trustee must keep up on trust laws, you may consider a co-trustee or a trust protector for their legal skills and knowledge.

Setting Up a Special Needs Trust

A Special Needs Trust allows a child to receive money, gifts, inheritance or other assets while still maintaining their government benefits. The child should never directly receive assets because staying under the legal limit of personal assets is essential to protecting their benefits status.

Writing a Will

In the absence of a Will, a probate judge could name your child with special needs as the beneficiary to your estate. An attorney can help you develop a Will that leaves your assets to the child’s Special Needs Trust so their benefits are not lost or compromised.

Considering an ABLE Account

Before ABLE accounts, individuals with special needs had difficulty saving due to the $2,000 asset restrictions placed upon them, so money wasn’t always available for additional costs that weren’t covered by their benefits. Now, with restrictions, money can be saved into an ABLE account and used for qualified disability expenses.

It can take a large village to raise a child, and an even bigger village to raise a child with special needs. By having people on your team who can walk with you through the maze of benefits and financial considerations, share ideas and resources, and talk to you about challenges other parents have overcome, it could help reduce some of the headaches and mistakes that pop up along the way.

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Published for the blog on July 19, 2018 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.