“What happens to my child if something happens to me?” In the category of “questions that wake up parents of kids with autism in the middle of the night,” this one ranks way up there. It is one of the most talked about questions on MyAutismTeam. It’s a question with very serious implications for your son or daughter, and it’s a subject that most regular financial planners and estate lawyers are neither trained nor qualified to handle.
Why It’s So Important – Your Adult Child Could Lose Their Government Benefits If You Don’t Put a Plan in Place
Case Example: Last year a family in California lost all the social security (SSI) and MediCal benefits they had lined up for their adult son with autism when his grandmother passed away. Why? The grandmother very thoughtfully left more than $30,000 in savings bonds to help take care of her grandson – now in his early twenties. Unfortunately she left those bonds in her grandson’s name. To qualify for SSI and MediCal benefits, he must have less than $2,000 in assets in his name. When Social Security caught wind of this inheritance, they yanked the young man’s benefits.
Furthermore, there are measures in place making it difficult to re-establish government services once you have been disqualified (this acts as a deterrent to anyone trying to hide assets). In the end, the family had to spend down the inheritance on services he used to get covered by the government, and then go through a lengthy process to re-establish his government benefits. The inheritance caused nothing but stress and hassle for the family – with no tangible benefit for the young man with autism. Now, imagine that the people who died in this story were his parents – and that they had left their assets to him? Now he would be without his primary caregivers and would likely lose his government benefits. No one likes to contemplate these scenarios, but a little advance planning can mean a world of difference for your child.
You’re Not the Only One Who Hasn’t Done This
Sadly very few parents of kids with autism have taken the steps to plan for the future. An Easter Seals study called “Living with Autism” revealed how big, and how unresolved a problem this has become. The study involved a survey of about 1600 parents of children with autism. It was funded by Mass Mutual (the insurance company) which has a whole division focused on people with special needs. A few things in the study jumped out at me:
- Only 12% of parents of kids with autism feel their children will be able to one-day handle their day-to-day finances independently
- Only 40% of parents had designated a guardian for that child, or had created a will.
- 4 out of 5 parents had not created a special needs trust.
Nearly all of the parents found this whole topic confusing and fully 56% of them did not know of any financial professionals who specialize in financial planning and life care plans for families with a special needs child. There are 500,000 kids with autism in the United States right now who, by the end of the decade, will be adults with autism. This has the potential to be a very large problem.
Charting a Course for Special Needs Families
As Ron Lieber wrote in his recent piece in the New York Times, it has taken a “growing number of financial advisors and other professionals who themselves have special needs children” to navigate all the regulations and products out there and chart a course of practical steps parents should take to ensure the financial security and care of their children in the future. I spoke with some of them. In short there are a few key steps most parents should follow:
- Have a plan for your own retirement – Hopefully you’ll live a long, great life. If you don’t plan for your own financial needs during retirement you won’t be able to help out your child. No – really. You’ll have less income, your own health care needs and related expenses will increase, and you may not be physically able to do some of the things for your child that you do currently. So you’ve got to take care of yourself first.
- Create a life care plan (it’s more than financial planning) - As noted autism advocate and mother, Shannon Des Roches Rosa, and Special Needs Financial Advisor, Nick Homer, explain in their blog post “When You’re Gone: Practical Planning for Your Child’s Future“, a life care plan is a “flexible roadmap” that covers your vision for how your child will be cared for when you’re gone, how they’ll learn and grow, and the best short and long-term strategies for quality of life in every area including: food, clothing, shelter, health, finances, family life, entertainment, employment, retirement and more. It includes a letter of intent that instructs the caregivers appointed in your living will (see the next point) how you’d like them to parent your child when you’re gone. As Nick Homer says, “It’s the personal side to the plan” and it’s something that you update annually as your child’s needs change.
- Create a Special Needs Trust to go along with a Living Will – The purpose of a special needs trust is to provide for the ability to transfer assets to your child without interrupting or putting at risk the government benefits that help provide and pay for his or her care. A special needs trust is a piece of paper that isn’t funded with any of your assets unless you die. At that point the assets you leave to the trust (including any life insurance proceeds or assets you may have) go directly into the trust. The assets are then owned by the trust, not by your child. The trust is administered on your child’s behalf as you instruct in a written plan. You appoint a person – sometimes it’s the child’s legal guardian, often times it is a separate professional – to administer the trust on the child’s behalf. Since the assets go into the trust – your child is able to maintain any government benefits he or she receives. The Living Will explains who takes care of your kids, who watches over the money, how you want to be treated in case you’re put on life support and so on. It goes along with the Special Needs trust.
- Special Needs Trusts and financial planning are only for the rich – Wrong. If your child gets more than $2,000 in their own name, government agencies could seize the assets and cause the guardians of your child to spend down any assets above that amount before providing any other benefits to the child. If you make more than $50,000 per year, own a home, or have any other kind of meaningful assets you will likely benefit from going this route. If you’re not sure – you can usually get a free consultation for further explanation (more on that below).
- I’ll outlive my child and be able to take care of them – Sadly, it’s just not likely to happen. This is less a “myth” than it is wishful thinking on behalf of many big-hearted parents.
- It’s not worth the money – It does cost money to do all of the things listed above, but the benefit of avoiding probate upon your death could make this amount seem small. A living will, special needs trust, letter of intent, life care plan, and financial plan all done by an experienced professional, and tailored to your specific needs, will likely run you anywhere from $3,500 to $6,000. If you live in Northern California you can participate in a pilot partnership in which MyAutismTeam has negotiated a significant discount for parents (see below for more details). If there is strong interest from many parent on MyAutismTeam we will expand this program nationally. Either way – any decent special needs financial planner will start with a free consultation so that you can understand your options before committing to spend any money.
If you’re reading this and saying, “I need to find someone who can help me do this” – you’re right. It’s complicated, and is likely worth the money to pay for the help from someone who does this every day.