EMBARKING ON A COMPREHENSIVE FINANCIAL PLANNING PROCESS

BY PAT BERGMAIER, CFP®, CHSNC™

The primary goal of most parents, my wife and I included, is to provide for our children when they depend on us. There is an added challenge when a child has a disability, as this dependence may never end. It is important for families who have this type of planning situation to embark on a comprehensive financial planning process that incorporates the needs of all family members – the parents, their child with a disability, and their other children/heirs.

While there is no cookie-cutter approach to this type of planning, families need to take these necessary steps:

1. Look to maximize government benefits. There are very strict eligibility rules to receive government benefits. For example, to receive SSI and Medicaid, an individual cannot own more than $2,000 in his/her name. Navigating government benefits can be an intimidating and, oftentimes, a frustrating part of a special needs plan. but the goal is to not leave anything on the table. Key Planning Point: Remember, these benefits typically provide a floor of supports for your loved one and may not provide the life you would want for them when you are gone!

2. Use the right attorney! Estate planning generally involves the drafting of wills, medical and financial powers of attorney, and sometimes trusts. The planning becomes more complicated when it involves a loved one with special needs and therefore requires a higher level of expertise. That is why it is important to work with the right attorney, one who has the knowledge and experience in drafting a Special Needs Trust. The goal of a properly drafted Special Needs Trust is to maintain eligibility for certain government benefits while providing quality of life and lifetime care for a loved one with special needs. Also, the attorney should have experience with counseling parents on the advantages and disadvantages of either pursuing guardianship or having your loved one sign a power of attorney once he or she turns age of majority – usually at age 18.

Key Planning Point: Special needs planning does not begin and end with simply having your legal documents in place. A Special Needs Trust document is different than a Special Needs Trust fund. You need to coordinate your financial and tax planning to make sure your trust gets funded!

3. Financial planning for two generations. Planning for what I've referred to as a "3-person retirement" shifts the focus on how we need to plan. All investment, insurance, tax and other financial planning decisions should focus on these two outcomes/goals. Ask yourself the question: "Will this financial decision provide me more income in retirement and also be an effective strategy for funding my loved one's future when I die?" Our top two priorities for all of our clients are:

• Maximize the caregivers' quality of life – Think about when the flight attendant on the plane says "Parents, please put your oxygen masks on first before you help your children." Your "oxygen mask" translates to being able to retire at the highest amount of sustainable income for the rest of your life. More income for you allows you the flexibility to continue to support your disabled adult child through your retirement but also help other family members.

• Fund the special needs trust – Let me elaborate: adequately fund, in the most cost-effective and tax-efficient manner possible, your loved one's special needs trust to provide for their lifetime care and quality of life, in the way YOU want this to happen.

Key Planning Point: Parents, you are the living, breathing "special needs trust" while you are alive. Today, if your child needs for something, who pays for it? In retirement, when your child needs something, who will pay for it then? In most cases, the need for the funding of a special needs trust to occur hopefully isn't for many, many years down the road!

4. Consider the ongoing care management of the child. Parents generally are the primary caregivers of their child with special needs. But who will care for their loved one when they are gone? It is important for parents to create a plan that addresses everything they do for their loved one daily. Parents should create a document called a Memorandum of Intent to provide information that caregivers might need to know about their son or daughter and their wishes for ongoing care as well as. A caregiver may be a family member of other individual, or it may be an organization that provides care management services as a complement to services received through government programs.

Key Planning Point: Transition planning is a common phrase in a special needs parent's life. You plan for transitioning your child from early intervention into school, then deal with your first of many Individualized Education Programs (IEPs). Then you start the seven-year transition plan at age 14, until transitioning out of school at 21 and are now also dealing with Individual Service Plans (ISPs). What is the third transition then? From living with a parent to living elsewhere in the community. A plan for this transition needs to be discussed, as hard as it might be, as this will have a tremendous impact on the quality of life for your loved one!

The process of creating a comprehensive financial plan requires working with a qualified financial professional. Financial professionals not versed in special needs planning will often advise all their clients the same when it comes to their investment, insurance and retirement planning. You cannot be put into a box when you have a loved one who is going to rely on you for the rest of his or her life. You should look to partner with your advisor and build a plan unique to both your future needs and your loved one's future needs. 

Don't settle for "OK" when it comes to your finances. You T haven't settled for an "OK" IEP from the school district, right? You probably wouldn't have been satisfied with an "OK" therapy plan from your medical professionals. Too frequently, families don't take the time to address their financial planning appropriately because they are "OK" in that regard. Common financial and estate planning missteps go undetected if experts are not used, resulting in inefficiencies and sub-optimal plans. 

Financial planning for families with special needs requires looking at everything from a very different vantage point. If done right, though, it can make a real difference in not only your loved one's quality of life but the quality of life of other family members as well.

Where to seek answers? In addition to national organizations devoted to special needs planning, seek a locally- recommended Chartered Special Needs Consultant (The American College of Financial Services), or a CPA and/or financial planner specializing in planning for those with special needs to see how a medically related capital expenditure may reduce your tax bill.•

[Author's Note: This article is for informational purposes only and should not be considered as specific financial, legal or tax advice. Depending on your individual circumstances, the strategies discussed in this presentation may not be appropriate for your situation. Always consult your legal or tax professionals for specific information regarding your individual situation.]

ABOUT THE AUTHOR:

Pat Bergmaier, CFP®, ChSNC™, now in his 17th year as a financial advisor, has focused his practice since 2009 on special needs financial planning. Pat has obtained his CERTIFIED FINANCIAL PLANNER™ (CFP®) certification through the CFP® Board and the designation of a Chartered Special Needs Consultant™ (ChSNC™) through the American College of Financial Services. Pat and his team support many local special needs non-profit organizations in the Philadelphia area; and he also serves on the advisory board of the Mass Mutual Center for Special Needs at the American College of Financial Services.