by Melissa Klein

As a financial planner and a mother of two special-needs children, Nadine Vogel has become an expert on financial planning for families with special needs.

Still, even with her planning background, when her first daughter, Gretchen, was born with a lifelong disability 12 years ago, Vogel needed help.

“When you have a child born with special needs, you can’t think beyond a day,” she said. “When you’re focusing on a day of decision-making related to doctors, therapies and surgeries, it’s hard to think beyond that.”

“I needed resources,” she recalled. “I contacted every organization, every nonprofit group, every government agency I could for information.”

Vogel’s experience was a turning point in her life and in her career. “I spent an enormous amount of time trying to find information,” she said. “I joined a support group, and I would bring what I found with me to meetings. People started coming to me for help.”

In 1998, Vogel went to her employer at Metropolitan Life, and pitched the idea for what would become MetDESK, the Division of Estate Planning for Special Kids at Metropolitan Life. Today, the division has 165 specialists operating in all 50 states.

Vogel, a vice president of marketing at MetLife, also founded Special Needs Advocate for Parents, a nonprofit advocacy group for families with special-needs children.

Part of the difficulty in planning is in getting parents to focus on what will happen to the child in the event of their deaths, and to take action.

“There are a lot of unknowns that you have to plan for, and you have to get the family to talk about them. All of us avoid having to talk about the really tough stuff,” said Cindy Conger, CPA, CFP, of the Arkansas Financial Group Inc., in Little Rock, Ark. “You have to be able to talk about who will take care of the special-needs child when the parents are not around. You have to have a lot of contingencies. If no one is available, where does that child go?”

“A child with special needs creates all kinds of family interactions and issues that are unusual to deal with,” agreed Kathleen Day, CFP, CFA and president of the Enrichment Group in Miami. Ten of Day’s 240 clients are families with special needs. Her firm brought a family counselor on staff about a year and a half ago. “We felt like we were getting into areas that were something we should not be doing without professional assistance,” she said.

“The parents’ concern is to take care of the needy child, but they don’t want their other kids to feel less important, so how it’s done is a big deal,” Day added. “We get the whole family together to discuss what the parents are trying to accomplish and we get input from the other children on what their role would be and how they would like it to happen.”

Government benefits eligibility is one of the biggest planning issues facing financial planners who work with families with special-needs children.

“Federal law says that if anyone leaves a special-needs child anything over $2,000, they lose their eligibility for most government benefits,” Vogel said. “Most parents don’t know that law exists, or they’re not sure of its implications, or they get scared and don’t do anything.”

For example, parents might name a child as the beneficiary of either a life insurance policy or their retirement plan. For a special-needs child, that can prove disastrous.

“It only takes one thing to undo your plan,” said Vogel. “You could have everything done perfectly - you’ve protected the child’s benefits, you have plenty of assets. Then Aunt Tilly buys a savings bond for the child. She’s just undone everything you’ve done. You need to make a list of anybody who could potentially want to leave your child something and say, ‘Here’s the way to do it.’”

That’s where special-needs trusts enter the picture. The trusts function to protect benefits eligibility. They can be used to pay for anything above the basic needs covered by government benefits, such as Social Security and Medicaid.

Working with an attorney who specializes in special-needs trusts is a must. “There are 13 different types of special-needs trusts. Which kind you use is dependent on the family’s specific situation and where they live,” Vogel noted.

While it’s not the only option, the majority of SNTs are funded at least partly by life insurance.

“If the parents don’t have a lot of assets, one of the best ways to fund the trust is through insurance - either survivorship life insurance or a straight life insurance policy,” said Andi Kang, CFP, of Financial & Retirement Management, in Huntington Beach, Calif. “You can have several hundred thousands of dollars in the trust for the price of the premium.”

Kang first became aware of the issues surrounding planning for families with special-needs children when her parents set up a special-needs trust for her handicapped brother.

“The planning can be complicated, but if it’s done right, you can do awesome things,” Kang said. “With forethought and planning, the parents can give fairly specific instructions to the people who live after them to take care of the disabled person as they would want and also the money to do it.”

She recommends that a family create a non-binding letter of intent in which they document their wishes and intentions, including the names of any professionals that they work with, as well as a description of the child’s abilities, habits, needs, likes and dislikes. The letter should be reviewed yearly and amended as needed.

In addition, a lot of care needs to be given with regard to who will be the trustee of the special-needs trust, cautioned Kang. “When money is involved, greed can set in. Whomever you choose to take care of the trust money may not follow their fiduciary duty,” Kang said. “You can’t pick somebody just because they have a good heart. They need to be able to implement the parents’ vision. Someone may be a great caregiver who loves the person, but they may not have the ability to take care of the money.”

“If the family can’t come up with someone they’re comfortable with, they might be better off having an institution as the trustee,” Kang advised.

Conger also advises putting language in the trust that allows the trustee to hire professional help, particularly if the parents are working with a particular advisor that they want the trustee to work with.

Guardianship of the child is also an issue. “When a child turns 18, they’re a legal adult whether they function as one or not. If a special-needs child doesn’t function as an adult, the parents have to go to court and apply for guardianship. Guardianship isn’t automatic,” cautioned Vogel. In addition, guardianship rules vary from state to state.

Since the laws regarding benefits eligibility and trusts are always changing, expertise in the issues surrounding special-needs children is essential. “A planner may be well-meaning, but because this is not their expertise, they might not recognize that there’s been a law change that totally changes the way the plan is done,” Vogel warned.

Knowledge of the local resources that are available to the family is also crucial. “As the family states their wishes, many of those wishes will be delivered through various service providers,” Vogel said. “The planner needs to know what resources are available, the cost associated with them, and any eligibility requirements.”

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