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Planning For the Future
with a Special Needs Child - Part 2
The Parents' Long-Term Needs

By Harry S. Margolis and Eric Prichard

As if the job of being a caregiver for a special needs child is not difficult enough on its own, Baby Boomers often find themselves becoming dual caregivers for both their children and their own aging parents.  Serving in this dual caregiver role often makes them realize that their long-term elder care planning is essential because many special needs children will be unable to provide the same assistance.
 
Planning for your own long-term care when you have a child with special needs requires a delicate balancing act between establishing your own financial position to ensure a comfortable retirement and making sure that your child's needs are protected, both while you are alive and after you are gone.  Most parents of children with special needs will immediately think of what they should do to protect their children's future before concentrating on their own needs.  However, there are ways for parents to accomplish both goals at once, through careful estate and special needs planning.  By working with a well-qualified attorney and financial planner who specialize in helping families with special needs, a caregiver can establish a child's security for life, while making sure that she will be well cared for when the parent needs his own cane to lean on further down the road.
 
In the first part of this series, we explored the tools available to parents of special needs children to provide for the long-term medical care, housing, and financial assistance the children will require.  In this part we explore the tools available to parents looking to provide for their own long-term needs into and beyond retirement. 
 
Looking at Your Own Long-Term Care
 
Careful planning of your own long-term care needs does two things.  First, it protects you when you need help.  Second, it allows valuable assets to flow to your child who needs them, instead of being squandered on your long-term care that could be paid for either through government programs or private insurance.
 
Before we go any further, there is one very important word of warning that any middle-aged or younger caregiver needs to hear.  Many Medicaid planning strategies designed for seniors, like transferring a home into trust or spending down and preventively transferring assets out of one's name, are not appropriate for caregivers in their younger years.  Your key goal will probably be flexibility, since you have many years ahead of you and will probably need access to most of your assets in order to care for your family.
 
Unfortunately, at some point, you may no longer be able to manage your own affairs or health care.  Therefore, a key first step in your own estate plan, other than a traditional will and necessary trusts, should always be the durable power of attorney and health care proxy.  A durable power of attorney gives someone the authority to make financial and basic caregiving decisions on your behalf, and a health care proxy allows someone to make your health care decisions should you become incapable of making them on your own.  Together, these two instruments should be enough to prevent someone from having to obtain guardianship in order to assist you with basic activities and financial management.  (If your child with special needs is capable of making his own decisions, he can create the same documents once he turns 18.)  
 
You should think carefully about who receives these very important responsibilities, keeping in mind that people your own age, like siblings, will probably have similar impairments along the way.  If you have children without special needs, they may be a good fit; but in any case, pick someone who knows your wishes and is capable of making difficult decisions on your behalf.  Finally, since durable powers of attorney usually provide almost unlimited power to transfer and manipulate your assets, it is important that your agent understands your child with special needs' circumstances and is aware of how to spend your money on her behalf, if necessary.
 
Is Long-Term Care Insurance an Option?
 
Another key part of your own estate planning will probably involve at least looking into long-term care insurance.  Having long-term care insurance can ensure that your care will be provided should you need it and allows you to conserve many of your assets for your child's care, instead of having to spend them down qualifying for Medicaid.  While these policies developed a bad rap when first introduced (that is why many parents of caregivers don't have them now), the insurance industry has responded to greater consumer demand by offering much better products at lower rates than ever before. 
 
When should a parent of a child with special needs look into purchasing long-term care insurance?  As you probably know, the younger you are when you purchase the policy, the lower the premium.  But parents in their 30s and 40s are probably too young to contribute to a policy they probably will not need for more than 30 years.  Most planners recommend looking into long-term care insurance in your 50s or 60s, but parents of children with special needs will probably want to begin the process closer to age 50 than 60. 
 
Long-term care insurance policies run the gamut in terms of coverage options.  How much insurance is too much?  A good rule of thumb is to research the daily cost of skilled nursing care in your area.  Subtract your daily income from this cost to arrive at the correct amount of coverage.  For example, if nursing home care in your city costs $300 a day, and your anticipated retirement income is $200 a day, you will probably need a policy that provides a daily benefit of $100 of care a day to make up for the shortfall.  Policies also offer different periods of coverage, anywhere from two years up to your entire lifetime.  Again, most people requiring long-term care don't require more than five years of care—usually a good amount of coverage for an average person.
 
Finally, unless you are over 70 years old when you purchase the policy, it is almost always advisable to include an inflation rider with the policy.  While you may need only $100 a day of coverage today, you're likely to need much more in 30 years.
 
 
 
The final part of this series will explore the best ways to deploy these instruments, which parents have at their disposal to balance their own long-term needs with those of their special needs child throughout their lives.

 

 
 Part 1  |  Part 3


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