A Case Study:
John and Cathy are in their 50s, and have begun to think about retirement.
They have four children – one of whom, Matthew (age 25), suffers from a disability.
The disability is not pronounced enough for Matthew to need full time care. In fact, for many years John and Cathy have been working hard to help him become more self-reliant. Unfortunately, Matthew has had trouble holding down a job. Even if employed, his income would not be sufficient to cover rent, food and medical bills.
To make matters worse, Matthew has started to become more defiant, and has developed a greater desire for independence. His parents are beginning to accept the reality that he may never achieve self-reliance – while he simultaneously feels that he no longer needs any help.
It has been all John and Cathy can do to manage Matthew’s care – and regardless of their vision for retirement, currently they haven’t even begun to plan for the future regarding their son.
Trying to balance the needs of Matthew and their other children, they have put off finishing their will. The couple is torn between addressing the separate needs of their kids, while also remaining fair.
A Common Concern
The names and exact details of the above story have been fictionalized, but believe it or not, Cordant sees this type of situation all the time.
Given the uncertainty of a situation like this, creating a comprehensive plan to provide the necessary support for a special needs child can be very difficult. Truly troubling is the fact that while many people face this exact problem, few know what to do about it, or where to turn for help.
If you or a family you know are in this situation, here are some tips for creating a long-term support strategy:
- If you don’t have a will, create a temporary document – immediately. In reality, creating a will takes time, and is likely to require periodic re-evaluation. But any will is usually better than what will happen by law without one. In this situation, if Matthew were to receive a large sum of money and have full control, he would unfortunately be a prime target for manipulation.
- Plan for the most support your child might need. It is important to separate the desire for your child to eventually be self-sustaining, and the practicality of planning for potential risks. Prepare for the possibility that your child may not be able to sustain him or herself. If you could take action today that would help shore up that risk, wouldn’t you take it?
- Consider how much control you need. Conversations regarding a child’s competence to make financial and health care decisions can become more difficult as they get older. For this reason, it is important that you realistically assess how much control over these decisions you might need in the future. If your child is 18 and you don’t feel they are mature enough to make decisions on their own, you should strongly consider making arrangements to defer these decisions to you. You can always adjust this later – but if the child does not want to relinquish control as they get older, it will be very difficult (and trying for the relationship) to force their hand.
- Build the right team. All parties should be clear on the plan in regard to therapy, support and finance. Typically, there is little communication between the different parties responsible for support. In particular, we tend to see that siblings are expected to provide support in the future, but are not involved in the planning. This is a mistake. As your other children grow, they must decide their level of involvement to support their special needs sibling. That choice can and should influence the plan you put into place.
- Define the ideal living situation. Determine the right environment for your child to grow and be their best. The plan should include where they will live, what support will be needed, and who will provide it. This should be created in concert with any stakeholders. For example, if a sibling will be responsible for some of the care, they may prefer not to have to travel very far. Considerations like this can greatly affect the resources and overall plan you put together.
- Create a financial model that allows you to assess different possibilities. Once you’ve defined the ideal situation, develop a financial budget that enables its execution, and determine how much would be required to fund your child’s needs for the rest of their life. This number is critical, because it serves as a baseline for prioritization. If you are able to fund this need and all your other estate objectives, great! More typically, it requires taking an honest look at your priorities and making tough decisions.
- Consider the impact of government programs. Your child may qualify for special disability benefits which can be used to pay for a substantial portion of support. That said, it can be difficult to qualify for these benefits and there are a number of trade-offs between using government benefits and self-funding. These factors should be incorporated into your financial projections.
- Adjust your estate plan. Your estate plan needs to be created in consideration of your strategy for taking advantage of government benefits and control of the assets. Some estate and financial planners recommend the use of a Special Needs Trust. This can be a great tool, but must be used with care. Many restrictions will be placed on the assets placed in the trust, and a large portion might go toward payment for the government benefits used during your child’s life. When using special investment vehicles like this, it is important to understand the full financial implications. Work with an estate attorney with experience in this area.
Cordant is currently helping a number of our clients plan for children with special needs, and often times these considerations have yet to be addressed (or are overlooked entirely). In many cases, our clients were left to figure it out completely on their own.
Since other care professionals in your child’s life do not have time or scope to discuss these measures at a high level, seek out a wealth management partner who can provide recommendations based on your entire financial situation. These are often difficult topics to discuss – but viewing the situation holistically can help you prioritize and identify next steps. Don’t leave your child’s future up to chance.
To learn more about How cordant helps its clients develop a comprehensive financial plan, give us a call at (503) 621 - 9207.
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