Planning for the future is a lot more complicated for parents of children with special needs. From a financial perspective, you're not only thinking about your own lifetime, but also your child's.
With proper planning, Florida families in this situation can take advantage of three ways to provide for their children:
1. Government benefits
Once your son or daughter turns 18, government assistance can play a big role in meeting their essential needs. For most families, this means Supplemental Security Income (SSI) and Medicaid. Yet these programs likely won't be sufficient to provide the standard of living your child deserves. And to remain eligible for benefits, your child must not have substantial income or assets in their own name - which means no direct inheritances. Thankfully, the next tool provides a way around this problem.
2. Special needs trust
This trust allows you to provide for your child's lifestyle (above and beyond what government benefits cover) without jeopardizing their eligibility for SSI and Medicaid. Instead of giving money and other assets directly to your child, those assets will go into the trust, to be used exclusively for his your child's benefit. You can designate the trust itself as the beneficiary of your 401(k), life insurance policy and other retirement assets.
If it doesn't make sense to create an individual special needs trust for your child, an alternative may be joining a pooled income trust. These trusts are managed by nonprofit organizations for the benefit of adults with disabilities.
In the case of both individual and pooled trusts, the trust funds can be used for supplemental needs such as a personal care attendant, a computer, recreational expenses and the like.
3. An ABLE (Achieving a Better Life) account
These special tax-advantaged savings accounts can be used for disability-related expenses such as education, housing, transportation and assistive technology. They're less expensive to set up and maintain than a special needs trust, and they give you more control over the funds.
However, because there are limits to how much you can contribute annually (and a cap on the total amount of the fund), these accounts usually aren't sufficient to replace a special needs trust. Instead, both can work in tandem to ensure that your child has a high quality of life long after you're gone.
Making the right choices for your family
Deciding how to structure these options for your loved one requires careful consideration. As with any legal matter, you should always consult with an attorney (and perhaps a financial advisor) to tailor a plan that's right for you and your family.