How to plan to support special-needs children

One area of planning that seems to be less known is the planning for the special-needs child. Unlike planning for a traditional family, where the focus is on "Who ultimately gets the money?" this planning is much more focused on "How is my child cared for?"

Who will provide the care, oversight, and companionship for the child when the parents aren't available? Often parents take the position that a sibling will take on that role. Often that just doesn't work. In reality, parents tend to be more committed to their children than children are to their siblings. This is an area where much family conversation should occur: What can the siblings take on; what needs to be delegated? The reality is that this type of responsibility often has a negative impact to the caretaker's family. That isn't to say that the companionship, love, and emotional reward for caretaking don't trump the challenges. The best plan will be one in which all involved have honestly considered the good and bad long-term impact of the plan.

An additional challenge relates to the cost of care. Most special-needs children receive some level of needs-based aid, and an outright inheritance may cause a lapse or termination of benefits. To avoid this, some families leave their entire inheritance to the other children, sometimes asking the other children - on the honor system - to care for the special-needs child. More often than not, problems arise from this style of planning. And government aid is limited. There are many things that it just doesn't cover. Relying solely on family members and government aid isn't the answer.

There are some good, although not simple, estate planning options. The law allows third parties, including parents, to set up special-needs trusts to provide for items that aren't covered by aid. The trust can be funded with a variety of assets, including life insurance on the parent. Cash cannot be distributed to the child, and the trustee must be meticulous in knowing what to purchase and what not to purchase. The rules for these trusts are strictly enforced. Those details aside, trustees can purchase things like the time of additional caretakers, transportation, education, and entertainment. Such a trust can provide for supplies and services that will allow both caretakers and the special-needs child to thrive. These trusts are very specific and should be drafted by a lawyer trained in special-needs planning. Once understood by the family, they work very well to care for the child.

Challenges are not new to the parents of special-needs children. With the family's commitment to learn this system and willingness to face the challenges head-on, the special-needs child really can achieve the best lifestyle possible.

• Darcy K. Houghton is a resident of Carson City and works in trust and wealth management with Whittier Trust and is Of Counsel to Houghton Jones (www.hou2plan.com).