Every time my kids accomplish something for the first time that they’ve been trying to do for a while, they take pride in themselves and gain confidence. Whether it’s tying their shoes or writing their names for the first time, they see that they can overcome an obstacle and succeed at something.

But what if a child is different? What if a child needs a safe and secure environment, and some extra special encouragement? I have seen children who need help with reading, writing, and speaking struggle when attention is not given.

The stress and strain in a parent’s life when it comes to simply caring for their children, in itself, is overwhelming. But for parents of a child with special needs, financial planning can be a daunting task. Parents not only have to plan for themselves, but also face the responsibility of planning for their child’s entire life.

Most parents will not outlive their children. A child with special needs may never be able to manage their own finances. In general, parents must be concerned with the question of how to provide their children with the same quality of life when they are no longer here to provide it themselves.

So what are some of the steps parents can take proactively to plan for the future of a child with special needs?

1. Establish a legal guardian or conservator for your child

2. Write your financial plan, which is a “letter of intent.” This is not legally binding, but can be a guide for a future caregiver regarding the plan you expect for your child. Tell your friends, relatives, or other potential care providers about your financial plans for your child.

3. Establish a special needs trust.

Special Needs Trusts

If your child has more than $2,000 in assets in their name, they may not be eligible for public funds. Special needs trusts allow beneficiaries to receive a gift, settlement or funds for their benefit, and do not lose eligibility for government programs. They are designed to pay benefits above what public programs pay to a person with special needs. The trust assets do not specifically belong to the person, but may be used to provide benefits to the person with special needs.

It is important to hire an attorney who has experience drafting trusts. If it is not worded correctly, public funding from the federal government may not be available to your child.

There may be more than one trustee for the trust and the trustees are fiduciaries. The trustee is usually a family member or appointed by a court. They must have experience managing investments, managing cash flow, paying taxes and reconciling accounts.

Hiring a financial planner

Financial planners can make projections, offer asset management services, and recommend an appropriate amount of insurance coverage. Here are some questions that can help you answer:

1. How much money will need to be available to provide care for your child in the future when you are not available to provide care?

2. How much risk are you willing and need to take to grow the portfolio?

3. What will your child’s monthly expenses be at some point in the future?

4. How much will inflation and taxes eat into portfolio returns?

5. What if you have another child who does not have special needs? How can you be fair and just with both children?

Should You Buy Life Insurance? Proceeds from life insurance could pay for child care that parents would otherwise have provided. The income is generally free of income taxes and, if structured correctly, may also be free of federal estate taxes.

Planning for a child with special needs is a journey. There will be challenges along the way, but clarity can make it a little easier.

This article is for informational purposes only and should not be construed as individualized investment advice.