It’s one of the hardest things for any parent to think about, but for special needs families, planning for the child’s needs when the parents have passed, is particularly important. Trying to determine how much money the child will need while the parents are living and after they have died is complicated.
A recent Kiplinger’s article asks “How Much Should Go into Your Special Needs Trust?” As the article explains, a special needs trust, when properly established and managed, lets someone with a disability continue getting certain public benefits.
Even if the child isn’t getting benefits, families may still want the money protected from the child’s financial choices or those who may try to take advantage of them. A trustee can help manage the assets and make distributions to the child with special needs to supplement his lifestyle beyond what public program benefits provide.
A child with special needs can have multiple expenses, and the amount will depend on the needs and lifestyle of the family and the child's capabilities. One of the biggest unknowns is the cost of housing. If the plan is for the child to live in a private group home-type situation, there are options. Some involve the purchase of a condo in a building with services for those with special needs. Many families also add into the budget eating out once a week, computers and phones and other items.
When the parents pass away, this budget will need to increase, because what the parents did for their child must be monetized.
Fortunately, public benefits can usually offset many of the basic costs for a child with special needs. For example, the child may be eligible for Supplemental Security Income (SSI), as well as a Section 8 housing voucher and SNAP food assistance. When the parents retire, SSI is typically replaced with Social Security Disability Insurance (SSDI), which is one-half the parent's payment.
When the parent dies, this payment becomes three-quarters of that amount. Adult Family/Foster Care may be available. That will depend on the group housing situation.
The child may also be working and bringing in additional income (minus whatever benefits may be offset by this income).
A complete analysis of the future costs to care for a child with special needs should be done while the child is still very young, so that parents have time to begin planning and saving as early as possible.
The analysis may not be perfect and will likely change over time. However, having at least a baseline to begin planning, can help the families and their advisors as they create a plan for the future.
Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”