How Much Funding Does a Special Needs Trust Require?
Funding a Special Needs Trust can require a considerable amount of money, but knowing just how much may be difficult to determine. How do parents of a child with special needs – whether that child is a minor or over 18– predict how much money their child will need for in the future? There are many variables to consider, including life expectancy, inflation, investment return, and government benefits. Fortunately, there are special needs financial calculators available free of charge to help you and your estate planning attorney or financial planner determine the cost of providing your child with lifelong support. To use one of these calculators, you’ll need to provide data about your child’s projected sources of income and anticipated expenses. After you’ve entered all of the requested data, the calculator will automatically tabulate an income-and-expense summary and provide an estimate of your lump-sum savings goal.
To gather the information you’ll need, you should take the following steps:
- First, assess your child’s future capabilities. This might be a more difficult task if your child is still young, but there are things you can do to determine these capabilities. Speak to your child’s medical professionals and ask for an evaluation of your child’s future prospects. If, on the other hand, your child is already an adult, you will have a better understanding of what his capabilities and needs might be in the future.
- Take inventory of your assets. You’ll want to be sure to include money from life insurance policies, retirement accounts, etc.
- Identify current and future living expenses, as well as future income sources for your child. Your child may be able to earn income and contribute financially, so you may wish to consider this in your estimates. Also, consider the government benefits and support your child is already receiving or might receive in the future. In addition, you may want to consider whether there will be gifts and inheritances from other family members.
- Place a dollar value on anticipated income and expenses. While the online calculators use broad categories such as housing, transportation, medical care, and education, you can use more detailed lists within each category.
- Use the data you have gathered to calculate the amount you’ll need to fund your child’s Special Needs Trust. Using assumptions about the rate of inflation and your investment returns, you should now have a target to help you plan for your child’s future needs.
Although these may be difficult topics for parents to consider, beginning the process of planning for the future of your loved ones will make you feel more secure now. Your special needs planning attorney can help walk you through the process.