Protecting Special Needs Kids Financially

More than 56 million Americans have some type of disability, according to the Census Bureau.

Autism, for example, affects one in 50 children. For parents of a child with a disability, the great fear is: "What happens when we're gone?"

One answer: Set up a trust for the child.

To support a special-needs child during and beyond your lifetime requires truly special planning. Not only are there more costs and uncertainties but also heavier emotional weight. Many families simply avoid the process: Only 21% of parents with special-needs kids say they are familiar with the planning steps, even though most worry about their children's lifelong financial security, according to a 2011 by MetLife Center for Special Needs Planning.

(The MetLife survey reports some caregivers do tackle planning today: 38% have a will, 36% have planned for future housing for their special-needs dependent and 32% have identified a trustee. Those percentages are up from a similar survey in 2005.)

When setting up a special-needs trust:
1. Know what type of trust you need. Two kinds of special-needs trusts exist: self-settled and third-party. If a disabled child creates his or her own trust, it's self-settled. Parents of disabled children create third-party trusts.

2. Choose a trustee. This overseer distributes the trust funds to your child. Advisors suggest a combination of a family member and corporate trustee: The family member understands the child's needs and the corporate trustee has expertise to manage the funds.

3. Plan for funding the trust. Parents' life insurance policies often fund the trust, as do retirement accounts or real estate.

4. Inform other family members. Families sometimes neglect to tell other family members about the trust or, crucially, educate them how it works.

5. Do test runs. Make sure everyone knows the rules of maintaining a trust.

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Protecting Special Needs Kids Financially

See Also:
NASGA:  Some Scoop on Trusts