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How Much Money Should I Provide My Child with Special Needs?

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A child with special needs
It can be hard to determine how much money you should leave for the care of your child with special needs, but the first step is to create some sort of a plan.

One of the toughest things about planning for a child with special needs is trying to calculate the amount of money it’s going to take to provide while the parents are alive and after the parents pass away.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for parents to have done some estate planning, but not necessarily special needs estate planning. They haven’t thought about how much money they should earmark to fund their child’s trust or which assets would be the best to use.

Special needs estate planning often involves creating a type of trust which will allow a person with a disability to continue to receive certain public benefits while avoiding complete impoverishment. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. But assets held in a special needs trust (SNT) don’t count toward this amount.

A child with special needs can generate a lot of expenses over his or her lifetime. The precise amount will be based on the needs and lifestyle of your family, as well as your child’s capabilities. When you die, this budget must be increased because the things you did for free must now be paid for.

An SNT often isn’t funded until the parents’ death. At that point, the trust would file a tax return each year and pay taxes at the higher trust tax rates. There are also legal and trust administration expenses to think about. But the public program benefits your child receives can, in many cases, offset many of the above-mentioned costs.

It’s vital to conduct a complete analysis of the future costs of providing for your child with special needs so you can start saving and making adjustments in your financial and estate planning. The Kiplinger article provides some great information about how to start thinking about the realities of your child’s future needs.

Speak with an elder law or estate planning attorney about the different types of special needs trusts.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

Other articles you may find interesting:

ABLE Accounts: No More Medicaid Recovery

Special Needs, Special Trusts: SNT FAQs