Securing the Future for Your Child with Special Needs

The top priority for parents of children with special needs is providing the level of care and support he or she deserves. For many, this daily concern brings with it a large financial investment—one that must be reflected in a long-term financial strategy. It is important for them to look at the expenses they face today, whether medical, educational or other, so they can ensure that their child will be well taken care of throughout his or her life. A key step towards achieving this goal is assembling a team of qualified professionals who can help them evaluate their entire financial picture and make sure they are on track to meet their goals.

 Essential steps

The first step is for the family to get their financial house in order so that they’re in a position to create a solid strategy for their child’s future. They need to answer these questions:

  Do we have an appropriate retirement plan?

 Have we provided for our special needs child after we’ve stopped working or died?

 Do our current financial strategies meet the needs of our other children?

 A financial advisor might work with the family’s personal tax professional to assess which strategies may be appropriate for their needs. For example, while tax-deferred retirement plans are designed to help put money to work more efficiently, they also carry additional taxes for early withdrawals. This may pose a problem for the parents of a child with special needs, who may need the kind of liquidity for educational and medical expenses that only a taxable account can generally provide.

 The nuances of legacy building

Parents working to save enough money to guard their child’s future financial security and quality of life must also put the proper protections in place to avoid endangering their son or daughter’s eligibility for Medicaid, Supplemental Security Income or the U.S. Department of Housing and Urban Development (HUD) housing program. An attorney can advise you on how to manage this.

An estate attorney can also be brought in to help the family include the child’s siblings in the legacy planning. Some parents decide to leave all their assets to their child with special needs. This can cause resentment in the other children and lead to possible estrangement between siblings. As a result, the child with a disability may be left without an important source of emotional support. On the other hand, some parents decide to leave all their assets to a son or daughter without a disability and expect him or her to care for their sibling. This type of arrangement can present difficulties because it is not legally binding and may be ignored or interrupted due to lack of interest, conflicting needs or the loss of assets in a divorce or lawsuit. Attorneys with expertise in dealing with these situations can work along with the family’s financial advisor to help families avoid these consequences—and find strategies suitable for all their estate-planning goals. Often the solution involves a fairer and more equitable distribution of the assets between the child with special needs and his or her siblings.

Discussions with a specially trained attorney and financial advisor should address estate-planning issues related to the special needs child early on. But these decisions should be made after a great deal of consultation and consideration. Parents of a special needs child should allow themselves time to consider all the options before they need to address any of these issues under pressure. This way they can build a strategy that will bring all their family’s needs into balance.

 Article written by Chris Sullivan Vice President of Special Needs Financial Services at Merrill Lynch.  

For more information, contact Jim Walsh your local Merrill Lynch Financial Advisor at (860) 728-3671 or http://fa.ml.com/james.d.walsh

Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state or local tax penalties. Neither Merrill Lynch nor its Financial Advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.

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