The Dos and Donts of Financial Planning for Special Needs Families - financial planning for special needs families

Last Updated on May 30, 2024 by Tresi Weeks

As estate planning attorneys, we get a lot of questions about financial planning for special needs families. In this list of dos and don’ts, we list some important special needs pitfalls to avoid and give you the information you need about setting up a family trust.

DO make sure a Special Needs Trust is established.   This step is vital to ensuring a child with special needs is not disqualified from public benefits that will otherwise be unaffordable, rapidly draining any funds to the child’s name and thereby leaving no supplemental funding to increase quality of life.
DO communicate with friends and family about the existence of a Special Needs Trust, and the importance that any funds gifted to the special needs child MUST be gifted directly to the Trust, NOT the child.
DO plan in stages for a special needs child.  Consider the costs of his/her early education, later vocational training, adult needs and retirement.
DO feel free to establish a 529 Plan for a child with special needs if college is a possibility.  Funds are attributed to the owner – usually a parent or grandparent.  When distributions are properly used, funds will not count as an asset for that child when determining eligibility for government benefits.
DO Stay informed – be aware of all of the public benefits available to a special needs child.  Some benefits will vary based on age and disability.

Attorneys in Frisco advise: Special Needs Trust Pitfalls to Avoid

DON’T wait to plan.  Once a child is diagnosed with a special need, planning should begin A.S.A.P.
DON’T name the same individual Executor, Trustee and Guardian if that individual is not well equipped to handle all aspects of each.  One person may be an excellent choice for handling financial matter, another for caring for the child.
DON’T fund a Special Needs Trust with Term Life Insurance if you have a better option.  Whole life, universal life or variable life will all be better options if set up properly, because the needs of a special needs child will often last beyond the life of the parents.  Permanent life insurance options are also more cost-effective in the long run for parents.
DON’T name a child as a beneficiary. Name the Special Needs Trust (or Simple Trust) as the beneficiary of any retirement or insurance accounts.
DON’T lose parental rights when your child turns 18 if he or she is not capable of taking care of himself or herself.  Apply for guardianship 4-6 months prior to your son or daughter’s 18th birthday to ensure your child is protected.

Our team of attorneys in Frisco are here to help you with your special needs trust and financial planning for families with special needs.
Contact us for more information today.

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