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What is the Right Amount to Fund a Special Needs Trust?

September 18, 2017

Thanks for coming back and reading our website blog here at Secure Planning Strategies.  If you have a special needs child, this week’s topic is going to really be of interest you.  This week, we are going to be discussing the amount of money needed to go into a Special Needs Trust to be appropriately funded.  There is a lot of information to cover so let’s get begin.       

When parents start the planning process for a child with special needs, they usually work under the perception that if they create a Special Needs Trust, the child will be taken care of and the needs will be met.   Unfortunately, the action of creating a trust does not ensure that the child will be taken care of and funding the trust is just as important as creating it.  In addition, parents always have to be educated that their own financial planning in the entire process of funding the Special Needs Trust.

It is important to take into account that parents need to keep a record of how much they spend on their child now and project what will be the child’s expenses will be in the future.  Also, it is also important to weigh in on what expenses the child will have that will NOT be covered by the government.  Parents should keep in mind that the aging process of the child and the potential inadequate government resources that might be present in the government resources.  This will provide a detailed picture of the child’s needs and the amount of money needed to fund the Special Needs Trust.  At the end however, planning for the Special Needs Trust funding should be done based on the parent’s ability to pay for it.   

Moving on, it may not be practical to count on a portion of the remaining estate of the parents to fund the Special Needs Trust.  The parents may need their assets for themselves, such as financially covering long-term care and may not have anything left by the time they pass away.  Parents may fund the Special Needs Trust during their lifetime but most will fund it at their death as most parents will be able to handle their child’s expenses while they are alive.  Life insurance is often used as a product that ultimately funds the Special Needs Trust.   This provides administrative ease and tax free income to the trust (based on current tax codes which could be subject to change). 

Aside from the information given up to this point, there are a couple of other elements to think about when it comes to planning for a child with special needs.  First, parents with large retirement assets may be able to leave them for the Special Needs Trust.  However, the document has to have specific language to hold the IRA on a tax favored basis.  Lastly, once the trust is funded, the trust is irrevocable upon both parent’s death.  Keep in mind that investments are made with the income needed in balance with the family’s tax efficiency. 

There are solutions that can address your family’s situation.  With that being stated, it is in your best interest to seek the help of a certified special needs planning wealth management advisor to assess your situation and provide real-world answers.  We, at Secure Planning Strategies can identify and help correct problem areas in your child’s special needs planning strategy.  Planning is major key factor in helping the disabled individual still have a secure future.  We are certified special needs experts who can help your family plan for tomorrow.  If you don’t want to wait for the next week’s blog article and you want to get started today, please give us a call at: (248) 827-2580 or e-mail us at:

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