Financial planning for kids with special needs

On Behalf of | May 16, 2020 | Estate Planning |

Parents often joke that their children form the foundation of their retirement plans. They invest in their lives and build them up to be great and successful people so they can take care of them when they are old. In many instances, this is precisely what happens. 

However, when children have special needs, they might need someone to take care of them all the way into their own adult lives. Parents might worry about who will take care of them after they are gone. They might also worry about how to protect the assets they leave for these children so that other people do not take advantage of them. 

What special needs trusts are 

To combat this problem, parents and other relatives who wish to leave assets to disabled family members set up special needs trusts. Forbes states that trusts provide ongoing financial support for the disabled, usually without disqualifying them for important social welfare benefits. Like other trusts, one or more trustees invest in the fund and oversee its management. 

Why set one up 

The main benefits highlighted above constitute some good reasons for setting up special needs trusts, but here are other good reasons. If parents worry that creditors might eat into the estate they plan to leave behind, perhaps from medical expenses for their children, the trust may help to shield the inheritance. Lenders, landlords and any other entity that might attempt to make a claim on the estate generally cannot access funds from trusts. 

How so set one up 

Financial planners often work with family members to set up a trust, but there are many decisions to make along the way. One of the most important is determining how much money to put into the trust. CNBC points out that most experts recommend a minimum of $100,000 but there is usually no actual minimum requirement. Two other important factors include determining the terms of the distribution as well as who the trustee members are. 

Parents might consider pooling resources together with other relatives to create a trust that protects them for a lifetime ahead. This asset protection tactic gives both the beneficiary and the parents peace of mind. 

FindLaw Network

RSS Feed