There are nearly 3 million special needs children in the United States. How many of those children’s families have a special needs plan in place? A basic estate plan will not likely be sufficient to provide a lifetime of special needs care for these children when their parents pass away. Unfortunately, very few families are sufficiently prepared to provide for their special needs child. According to reports, only about 62% of families with special needs children have a proper plan in place to provide the lifetime of care their children will need when the parents are no longer able to provide it.
Consider life insurance coverage as a resource
Believe it or not, probably the most common way to provide for the anticipated costs of a lifetime of special needs care is through a life insurance policy. Indeed, nearly 85% of families with a special needs child under the age of five, have a life insurance policy in place. But, parents with special needs children ages 13-18, are less likely to have an insurance policy. The problem is, the cost of care for children with special needs tends to increase with age. The reality is, most parents are unaware of the fact that they can access the accumulated cash of certain policies, in order to cover costs of their child’s special needs. Even those that are aware of the cash value benefit, nearly 72% do not actually take advantage of the benefit.
Mistakes to avoid in special needs planning
Simply having a special needs plan is not much of a benefit, if it is riddled with mistakes. Almost half of all parents with special needs children make the mistake of leaving the funds directly to their children, or naming their children as the beneficiary. Both of these methods will likely disqualify their children for necessary government benefits. Another problem is that the majority of parents with special needs children fail to take the necessary step of creating a special needs trust. This special type of trust is necessary to provide for any supplemental needs and expenses, while protecting the child’s eligibility for government benefits.
How to provide for a lifetime of special needs care
There are basically four easy steps parents can take to ensure that the necessities of their special needs child will be protected. First, you must talk to your estate planning attorney to determine how to develop a financial plan. This plan needs to be adequate for funding a lifetime of support for your special needs child. Second, create a special needs trust that will provide protection for your assets, while ensuring that your child will remain eligible for government benefits and services. Third, select an appropriate guardian for your special needs child. Discuss your decision with that person and inform him or her of the commitment and obligation that will be expected. It is important to ensure that the guardian is willing and able to serve in this important role. Finally, purchase a permanent life insurance policy that will cover the anticipated costs of your special needs child’s care.
If you have questions regarding special needs strategies, or any other special needs planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Bryce L. Rader, Estate Planning Attorney
With a law degree and a Master of Health Administration from the top health law program in the nation Mr. Rader began his career in public service with the Nevada State Board of Medical Examiners. While with the Board he dealt with many complex health care issues confronting the state and assisted in redrawing state health law. Mr. Rader next worked for the Governor’s Office, Consumer Health Assistance. As Deputy Chief Ombudsman he represented the interests of many citizens before health care providers, state legislators and other state agencies.
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