Special Needs Planning 101: Preparation is the Key
by Kim Kenney, Financial Advisor

If you live in Florida long enough, preparations for hurricanes become the norm between July and September. Long lines at grocery stores and gas stations, information regarding landfall of the storm fills the airwaves. All of the time spent boarding up windows becomes “old hat” from the near misses of catastrophic storms. We then become desensitized until tragedy strikes. All of this may seem cliché, but it’s the stories of loss that make us realize how fortunate we are and that next time we will heed warning and prepare. This is also the case in regards to Special Needs Planning. It’s stories of tragedy and loss that makes parents of special needs children contemplate and consider the utmost important questions “What happens to my child if I am unable to provide care and support? Have I built a solid financial future and secured government assistance to provide a lifetime of care for him or her?”

Educating your family, extended family and friends is an important process in the financial security and future of your special needs child. Family members with good intentions can jeopardize your child’s government assistance such as Supplemental Security Income (SSI) and healthcare. Many times, family members such as grandparents will gift funds to a special needs child or name them as a beneficiary to a life insurance policy, but without a full understanding of the consequences.

Under current federal law, any inheritance of more than $2,000 can disqualify an individual from federal assistance. For instance, if a grandparent names the special needs child the beneficiary of a life insurance policy, the Supplemental Security Income (SSI) could be reduced or cancelled for up to three years. Also, inheritances from annuities or qualified retirement plans, such as a 401k’s or IRA’s, will affect eligibility for federal and state assistance programs if above the $2,000 threshold.

Another way many families cope with distributing assets to benefit a special needs child is naming a family member or a friend to own and manage the assets on the child’s behalf. Although this may seem to be a prudent method of providing financial security, these assets are now the owner’s property and could possibly be reduced due to litigation, bankruptcy or divorce. Furthermore, your child may outlive the person you have chosen and the assets would be distributed through their will, possibly leaving nothing to your child.

One way to mitigate risk and protect government assistance for your child is to develop a Special Needs Trust with qualified legal counsel. Special Needs Trusts are legal entities that own assets such as investments, life insurance benefits, savings, and property. Then the assets are managed, invested, and dispersed by a trustee that you select and the trustee is prohibited from personally benefiting from the trust. Since the child is the beneficiary of the trust and does not own the assets personally, this will not jeopardize any current federal or state assistance.

Although these issues maybe uncomfortable to discuss, it’s the outcome that will provide you a sense of relief and secure a financial future for your special needs child. Take the time and open the lines of communication with your family before an innocent mistake or unfortunate incident changes the landscape of your child’s future.

With any financial or legal matter, it is important to consult a Financial Advisor or an Attorney that specializes in Special Needs Planning.

Kim Kenney is a Financial Advisor with Baughman Financial Group in the Tampa Bay area specializing in Special Needs Planning. She is the current co-chair of Kids and Canines, a non-profit program under the auspices of the Hillsborough County School District and is also on the ESE Advisory Board of Pasco County School District. If you have questions regarding Special Needs Planning, please feel free to contact her at 813-991-5050.