While estate planning is essential for any parent, it takes on additional significance for the parents of a child with special needs. One of your biggest concerns is probably planning for their future care when you are no longer there to look after them.
There is a lot to consider and each child’s needs are unique, depending on the nature of their disability and the level of ongoing support they will need. Any plan you put in place is likely to consider things such as where they will live, who will care for them on a day to day basis and how you can safeguard their financial interests.
Not only do you need to make sure your child receives the same level of support in your absence, but you also want to set in place a strategy that is transparent and allows all your children to thrive.
As best you can, try to plan for the long haul, protecting your child from any future changes to circumstances or legislation as well as taking stock of how their personal needs will change over their lifetime. You also don’t want to jeopardise their eligibility for any government benefits.
The matter of trusts
One of the big concerns for parents is that their child may not be capable of managing their own finances. One way around this is to establish a testamentary trust as part of your Will.
If your child is severely disabled, over the age of 16, and you are concerned that the money you leave them could reduce their social security benefits, you might consider a Special Disability Trust. This will not only provide for them, but the money and income will not be subject to any means test as long as the amount invested is under an inflation-adjusted cap.
As at 1 July 2018, the cap is $669,750. Plus, you can spend up to $12,000 a year on expenses unrelated to their care and accommodation needs.
Other types of trust include a capital reserved trust, where the individual can receive income from the trust and use the trust’s asset such as the home during their lifetime, and a protective trust, where the trustee can apply income and capital to the trust over its lifetime if more funds are needed for their wellbeing.
You need to maintain a very long-term view and think about what will happen to your estate when your special needs child dies and whether they will be capable of making decisions on its distribution. It may be a good idea to have a clause in a trust that says the money should go to your surviving family members.
The choice of trustees is also important. In most cases, Australian law dictates that there will need to be more than one, and while it may seem natural to appoint your other children as trustees, in general it is wise to choose someone outside of the family to avoid conflicts of interest.
While appointing an external trustee can be a more expensive option, if you select the right person, you can have confidence in their empathy and financial acuity. With the correct structures in place, your child or their carers can also be involved in financial decisions, if appropriate.
Super plays a role
In some circumstances your super can also be used to provide ongoing support. If your child is considered to have a severe disability, you can pass your superannuation money on to them as an income stream regardless of their age.
It takes careful and considered planning to provide properly for a loved one with a disability, beyond your lifetime. It’s also important to review your plan frequently, making adjustments when legislation or your child’s circumstances change.
We can assist and are here for you and your family, now and into the future.
Read more from our October 2018 update here:
- Housing prices off the boil
- Throwing yourself in deep to improve productivity
- Getting into the great outdoors
Contact us on 0883620060 to discuss your existing financial plan