How Having a Child with special needs impacts your retirement planning

We worry. It is not just the doctor visits, the drumbeat of tests and follow-ups. It is the future. How will my child manage? What kind of life will they have? It is two parents talking about their fears, absorbing hard truths and forging a path forward. Planning for children with special needs requires knowledge of available support resources and the legal tools that can turn ideas into reality.

Parents nearing retirement should map out a plan for their special needs children in two steps: First, make sure you have the legal authority to handle the health and finances for your child. Depending on your child’s capacity, obtaining legal authority can be as simple as executing a power of attorney and health care proxy or it can involve filing an Article 17 A Guardianship in Surrogate’s Court. Article 17A Guardianships are Court Proceedings that appoint parents of a developmentally disabled adult child to be Guardians of the person (health) and property (finances). This designation is vitally important because health care providers and financial institutions may withhold information from parents who lack the proper authorizations. Soon-to-be retiring parents should also ensure that alternate health care proxies and back-up agents under a power of attorney or stand-by guardians under an Article 17 A have been chosen just in case an aging parent is unable to serve.

The second step is creating an estate plan that incorporates a Supplemental Needs Trust (SNT) to protect assets while maintaining your child’s governmental entitlements. SNT’s can be first party (assets originating from the children themselves) or third party (assets gifted by parents, grandparents, siblings or other close individual). First party SNT’s contain payback provisions that prioritize reimbursing New York State for monies paid by the state to service your child before any other beneficiaries. Third Party SNT’s have no such restrictions. Parents can set aside money for their special needs child and select beneficiaries to inherit any remaining funds not used by that child during the child’s lifetime. Naming alternate trustees to succeed aging parents is also helpful. Parents can fund SNT’s with investments and property immediately upon execution or make the SNT a beneficiary of an asset which would flow through at a later time following the passing of a parent.

New York State offers ABLE accounts which protects and grows a disabled person’s funds, allowing them to pay for “Qualified Disability Expenses,” such as educational costs, healthcare, housing costs, transportation, employment training, assistive technology and personal support services. Like an SNT, these accounts (if maintained under $100,000) allow one to keep SSI and Medicaid. Funding can originate from the child or “Ugift” contributions from friends and family. ABLE accounts can be opened by the child if they have capacity or by legally authorized persons or Guardians. One important prerequisite is that the individual must have had a disability present before age 26. Similar to first party SNT’s, there is a New York State payback provision after death. Any outstanding qualified disability expenses may also be paid out of remaining ABLE funds following their passing.

Setting up a plan that protects and encourages your special needs child to succeed is not overly complicated. Talk to the professionals at The Feller Group, P.C. today for more information on special needs planning.