Special Needs Planning: 11 Common Mistakes to Avoid

Special Needs Planning: 11 Common Mistakes to Avoid

Special needs planning is a tremendous undertaking.

Setting up a trust for your special needs child entails providing for his ongoing care and ensuring that he receives its full benefits. Your plans may be well-intended, but may not bear fruit if you do not implement them well. Parents often make these common mistakes viz special needs planning.

1. Asset Distribution

Those close to Special Needs children, in all earnest, try to ensure their financial well-being. They “gift” or leave assets in the name of the child, hoping that they will prove to be stable sources of income in the future.

Doing this harms, instead of helps the child, because he may not know how to manage them. The good news is that there are ways to avoid this error.  Have a discussion with the child’s parents about how best to leave assets to him. If you are the child’s parent, ensure that everyone in your family circle knows how to “gift” him.

2. Failure to Fund the Trust

A special needs trust is the backbone of your caregiving plan for your child. It secures the assets that you are setting aside for your young one’s future.  Many people have trust documents drafted, but do nothing to make sure that it comes into being. They neglect to apportion the funds necessary to activate it. A trust has no value unless it has funds.

A financial advisor is an invaluable assistant because he can create a plan with sample scenarios to determine how much money you need to keep it active. He will also give you suggestions for making it bear fruit. He may advise you to use existing assets, or buy an insurance policy, using the trust as a beneficiary.

3. Entrusting a child with special needs to his Siblings

Many parents of special needs children often disinherit them. They choose instead to bequeath their assets to his siblings and entrust him to their care.

While this seems sensible, the sibling given the additional share may not care for the Special Needs child as hoped. He may use the money for his purposes, such as clearing debts or buying a new property.

Issues may also arise in the event of unexpected circumstances, such as a divorce. If the recipient of the money (in this case, the special needs child) divorces, the money may go to his estranged spouse, who will have no interest in his care. The death or incapacitation of the sibling tasked with caregiving may complicate matters as well.

A third-party Special Needs Trusts protects the interests of all parties. It will delineate how to care for the Special Needs Child and reduce the burden on his siblings.

4. Appointing the Same Family Member as both Trustee and Caregiver

Parents of Special Needs children often name the caregiver of the child as his trustee. The roles of caregiver and trustee should be separated; the later has administrative responsibilities. The person who looks after the child may not be the best person to administer the trust.

SPecial Needss Planniing

Image Credit: The Lookout Builder

5. Insufficient Insurance

Buying life insurance for someone is never an enviable task. It is overwhelming if the person has special needs. You will have to ponder over how much your loved one will need to maintain his quality of life and how he will fare after you have passed.

Insurance, however, secures the future of someone with special needs. Most parents make the mistake of not setting aside enough money for insurance policies. To circumvent this problem, we recommend that parents complete an Insurance Needs Analysis.

The care of a Special Needs child is a huge financial responsibility. This analysis will ensure that there will be enough money to support him, and the rest of your family in the event of the caregiver’s death or disability. It also answers the question of who will look after the caregiver if he becomes disabled. The analysis also addresses the concerns of how much insurance you must set aside to supplement the lost income in such events, and the costs of long-term care.

6. No Protection

People with disabilities are often the victims of predatory financial scams. Unsavory businesses or relatives may try to poach their property, which will rob them of the care they need.  Having a limited capacity to protect himself, a Special Needs child is particularly vulnerable. A trust is beneficial because it restricts access to information about his finances. It also prevents him from unwittingly misdirecting his assets.

7. Not Hiring Special Needs Planning Professionals

Many parents take the positive step of setting up trusts for their children. However, their plans fail because they do not consult planning professionals. Alternatively, the professionals they engage may not understand the unique needs of the child. They may also leave the planning task to attorneys who draft plans that are inadequate. Hiring a professional who understands the planning process can save you a lot of money.

8. Procrastination

Procrastination is one of the costliest mistakes you can make when it comes to special needs planning. Meticulousness is in order. To ensure his ongoing care, you need to put a special needs trust in place. Make plans as soon as you can because life is unpredictable. If you do not do so, your child may have to depend on people who do not have the resources to take care of him.

9. Unclear directions for Implementation

A common error when creating a special needs trust is leaving unclear directions for its implementation. Typically, the guidelines should include the child’s preferences, routines, friends, doctors and other details that a caregiver must know to maintain the child’s quality of life.

10. No Special Needs Planning Customization

Another common error parents make when setting up a Special Needs Trust is to opt for a general plan. Special Needs Trusts are specific and take individual needs into consideration. A general plan may render your child ineligible for the benefits he needs.

Professionals usually design plans to include a child’s medical expenses, dental expenses, required equipment, transport, and dietary needs. Your child should be able to pay for the equipment, appliances and other necessities for maintaining a high quality of life.

11. Not Including Others in  Special Needs Planning

Include trusted family and friends in your planning process. A benefit of using a trust that takes immediate effect is that family and friends can include assets in it. The family saves on cost because there is no need to set up different plans.

The plans you made for your special needs child will be a boon for him if you are aware of these possible mistakes and take steps to avoid them.