Planning for Retirement with a Special Needs Child

Planning for retirement can already seem intimidating: it can be seen as time-consuming, stressful, and expensive. For parents of special needs children or adults within their care, retirement planning may seem impossible.

Retirement planning usually involves analyzing income, expected income, and assets and planning those inflows against expected outflows, or expenses, from retirement to the end of life. But parents of children with special needs may need to ensure their children are cared for even beyond their lives, necessitating a multi-generational time horizon in planning. In addition, one or both parents may make career and lifestyle changes to care for their children themselves, which can impact the cash coming in to fund retirement. If a caretaker passes on, extra expenses or decreased income to the surviving parent may result from hiring full-time care or taking on those roles. Finally, costs can be higher for special needs children and may increase as these children become adults. Insurance premiums, and the costs of health and medical care, caretaking, special programs, rehabilitation and therapy, and adaptive or assistive equipment may all need to be factored into the equation.

A skilled estate planning attorney can make this daunting process more navigable. One tool estate planning attorneys can use is to help their clients set up special needs trusts to protect their children’s government benefits while also giving them a stream of additional income.

Special Needs Trusts

Special needs trusts work like any other trust: a grantor establishes a trust to help the beneficiary receive property and assets and names a trustee to administer the trust. Special needs trusts allow an individual to receive funds without impacting their income eligibility for much-needed special needs benefits from the government, such as Medicaid or Social Security. These programs help fund direct medical and living expenses. Special needs trusts, in contrast, cannot be used for living expenses or anything covered by government programs, but can be used for supplemental expenses such as job training or tuition or non-essential costs like furniture, personal services, or hobbies.

There are two types of special needs trusts. Third-party trusts are funded by parents or family members and can be included as part of a will or as a standalone trust. Family can then give to the individual without compromising their benefits eligibility, and the third parties can determine how the funds are utilized or name a trustee. A first-party trust, in contrast, is funded by the special needs individual to shield funds from government benefit eligibility. This occurs most often when an individual receives a large inheritance or wins a substantial damages award from a lawsuit.

Contact a Houston Estate Planning Attorney Today

If you are the parent of a special needs child and want to consider planning for their needs in your retirement and beyond, contact a Texas estate planning attorney today. The lawyers at McCulloch Miller, PLLC have extensive experience in estate planning and other family law and financial matters. Contact our office at 713-936-9073 to schedule an initial consultation with an attorney on our team.


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