Legal & Planning

Special Needs Planning: Considerations for Extended Family

It’s wonderful when families of children with special needs have a support system that's strong and reliable. Your extended family members likely want to do what they can to provide help and love. That support may mean babysitting or helping out around the house—or including a special needs child as a beneficiary of financial accounts or assets. Whether it’s you as the parent who needs to set up wills and other estate-planning documents, or you have an extended family member who wants to support you by helping provide for your child, you and your relatives need to recognize a few important factors before creating any legal documents. Here are some considerations for parents and extended families when setting up financial or estate plans that include a special needs child as a beneficiary.

Compose a Letter of Intent

Letters of intent, or LOIs, specify your wishes—or your child’s wishes—regarding who in the family should be responsible for what. This document also includes relevant information on your child’s preferences, history, or habits that would be crucial for a future caretaker or family member serving in a supportive role for your adult children to know. You might include particular behaviors or aspects of daily routines in an LOI. You can also include information like:

• medical history
• lifestyle preferences
• living arrangements

Depending on your child's needs and degree of independence, include him or her in the conversation about what should go into a letter of intent. If someone other than you were to provide care in the future, what would your child want that person to know? Families should have open discussions about this, too. In addition to all the above information, an LOI needs to name a responsible party—but you should not choose another family member to fill this role unless you’ve spoken to that person first. Recognize any family members' unwillingness to fill a certain role for the child with special needs (be it handling financial assets, coordinating care, providing living arrangements, and so on). Not all members of your extended family will feel confident in their ability to provide a particular level of care, so communicate first. This way, you’ll know your LOI names family members who feel completely comfortable taking on their stated responsibilities.

Consider a Special Needs Trust

A letter of intent can name responsible parties for specific aspects of your child’s care—from providing a place to live to who will drive him or her to the doctor. No matter how involved extended family members get, however, there’s likely to be some costs for them involved. Make it easier on both your child and your extended family by considering a special needs trust. This might help alleviate the financial strain on all members of your family. Depending on the kind of trust you set up, you could fund it in a few ways:

• First-party trusts are those funded by money received directly by the beneficiary, through an inheritance settlement, or another source.
• Family members or insurance policies set up by others can fund third-party trusts.
• Family members who have cash available can contribute to a third-party trust.
• You can set up something called second-to-die insurance or dual-life insurance. One of these policies that pay out in a lump sum can be directed into a third-party trust for your child to use should anything happen to you.

Understand Government Benefits

Part of the reason a special needs trust is a beneficial financial planning tool is because it ensures your child (or the family member responsible for your child's care and the associated costs) can access assets you leave behind without impacting your child’s ability to receive government benefits. Well-intentioned family members can cause a loss of government benefits if they pass on too much money to a special needs child directly (due to income limits for SSI). Your child can still receive Medicaid and Supplemental Security Income in addition to any money left in a specially structured trust, however. There are a lot of factors to consider when planning for the lifelong needs of your child, and this type of planning can easily be overwhelming for families. The good news is, you don’t need to handle this all on your own. In addition to keeping open lines of communication with your family members who want to be involved and who want to help support you and your child should anything happen to you, you can talk to a financial planner and an estate attorney. Both these professionals can help make sure you’re maximizing benefits available to you while strategically setting up funding that will help your child receive the care he or she needs, even when you’re no longer here. If you want an added layer of confidence, look for advisors who specialize in serving special needs families and understand the nuances around benefits, specific trusts, and more.