Concern over the financial future of your family is common. When a member of your family has special needs, either mental or physical, this concern can grow exponentially.
Whether this member of your family is a child, a spouse, a sibling or another relative, taking responsibility for him or her means providing the funds needed to assist and manage these special needs now, and in the future.
Many types of disabilities require additional funds on a day-to-day basis. This might include special education, therapy, medical care, and other expenses. At the same time, you must plan for the future to ensure that your loved one is taken care of, even in the event you can no longer provide care. While these tasks can seem overwhelming, there are a number of steps you can take to make sure your family’s finances are managed as effectively as possible.
There are many types of disabilities, each resulting in their own requirements and special needs. If your family member has recently been diagnosed with a disability, or if you have recently taken on new responsibilities for a disabled family member, you may not be fully familiar with these requirements. Therefore, it is important to learn as much as you can about the nature of the disability, as well as the additional expenses it involves.
You can find community and online support groups for others in your position that may be able to provide some answers. Medical professionals and other care experts can also help you, and you can request additional information from entities such as a school board. Once you know what to expect, you can learn how to create a plan. It is vital to research the laws surrounding the financial plans you create. This includes the limitations on assets that can be put into your child’s name in order to ensure he or she qualifies for government benefits.
Creating a savings plan is an important first step, to help you manage the expenses of your family member. You can use the research you compiled to begin outlining your savings goals. A financial planner can also help guide you toward the best savings vehicles. While the amounts you need to save may appear daunting, start by putting aside anything you can. Consider adding the following to your list of savings goals:
As the primary caregiver for your family member, having a will in place is vital. The will provides for the needs of your loved one, while still ensuring he or she can benefit from government services. One of the best ways to ensure your loved one can receive funding without it impacting his or her benefit eligibility is to set up a trust. You can find information on this below.
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It is important to find a lawyer who has experience in writing these types of wills, including a knowledge of any disability laws that might affect your loved one. Writing a letter of intent can also be an important part of your estate planning. This is not an official legal document, but it details the needs and requirements of your loved one, as well as what you hope will be provided for him or her. This can help ensure the funds left behind in your will are spent as you want them to be spent.
Government benefits can be extremely useful for families with members who have special needs. Researching the services that may be available to your loved one can be a huge help in saving on expenses. This can include medical care and therapy, and even reimbursement for special education. It can take extra time to find and apply for some of these benefits, but the sooner you begin receiving them the more you can save.
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However, you should always be aware of your loved one’s benefit eligibility. If he or she has more than the allowable amount of assets in his or her name at any given time, the eligibility will be lost. Using trusts and other exemptive measures will be very important to ensure your family member can access government programs such as SSI.
A special needs trust can be the most valuable part of your financial planning when providing for a loved one with a disability. These trusts are considered a separate entity from your family member, and do not impact his or her eligibility for government assistance.
Additionally, the trust should be protected against any claims from creditors or lawsuit plaintiffs. Make sure to set up the trust so your family member is considered the sole beneficiary, thus providing for his or her future. Setting up the trust must be done carefully, so follow these guidelines when you are ready to begin:
The ABLE account gets its name from the Achieving a Better Life Experience Act. These accounts are a good option if you are not able to set up a trust. They have more restrictions than a trust, with a $14,000 annual contribution limit. In addition, the funds must be used for disability expenses exclusively, and the types of permitted expenses are limited.
You will be taxed on your contributions to this trust, but the funds can be withdrawn without further taxation. Any growth of the trust is also not taxed. Furthermore, an ABLE account is exempt from the $2,000 limit that would disqualify your loved one from government benefits.
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