By Rob Wrubel, CFP ^®

Take two minutes right now to figure out how much you want to leave in a special-needs trust to support your son or daughter with a developmental disability.  Go ahead. I will wait.

Hard, right? Talk about complicated.

The number of variables is high and the assumptions you have to make will change the dollar amount. Here are a few ideas to know as you begin to plan to create wealth and pass it along to your family.

1. Benefit programs. Will you expect current benefit programs to provide support in the future? SSI and Medicaid are invaluable and for most families the lifeline to housing, food, community activities and health care. For almost all of us with a family member with a qualifying disability, replacing those benefits is nearly impossible. The benefits add up to hundreds of thousands or millions of dollars of value. For now, assume they will continue. If not, multiply the monthly benefit from SSI and Medicaid and multiply that by how many years you expect your son or daughter to live.
2. Current expenses that are not covered by benefits. This step is easier for those with adult family members with a disability – you have at least a few years and maybe decades of experience in knowing what expenses are covered and what are not. Do you spend $250 per month, $2,500 per month or some other amount? Expect those payments to continue in future years with the trust paying them. Again, multiply that amount by the number of years.
3. Young family members. Frankly, at this point you have to guess or make some assumptions about care costs. One option is to designate a percent of your income to save for future benefits. Another is to research what other families with similar issues pay and use that estimate.
4. Housing. More likely than not, housing expenses for your family member are included in your calculations above. I have talked to families who want to leave their house or condo to the special-needs trust. If that is the plan, make sure there is enough money for the trust to pay the expenses of the house – utilities, insurance and all the expected maintenance required. These add up and are often overlooked.
5. Out-of-pocket expenses. Unless you have a bookkeeper’s mentality, chances are you did not add all the little costs you pay for your family member. Things like movies, travel, clothing, food that you include in your usual spending are often missed. If you want them to continue, add that to the amount needed in the trust.
6. Life expectancy. How many years do the funds in the special-needs trust need to last? Hard to know and even harder to think about. You can look up average life expectancies for the disability your family member has and then estimate from there. Factor in, to some degree, your family member’s health and unique situation. Consider your own age. Are you a young parent? Maybe you will outlive your son or daughter. An older one, not as likely. People with Down syndrome live, on average, to the age of 60. People with Autism tend to live about the same age as the rest of the population.
7. Inflation. Do not forget about inflation. Inflation ticks along, on average around 2.5% – some years more, some less. Choose an inflation rate for planning for those future expenses. This adds to planning complexity as you have to compound the inflation percentage over the years of life expectancy.
8. Current assets. Do you expect to use your current assets to support you through your life? Have you saved and invested enough for your regular expenses and then more to cover long-term care needs for you? What you have left depends on when you pass away, your rate of return, taxes and your spending. Those variables change the amount that goes to the trust unless you have taken steps to fund a separate account or build additional wealth separate from what will support your own needs.
9. Wealth creation. Once you have a figure in mind, understand different ways to create wealth and fund your own needs. Work with your investment and planning team to understand the different options – retirement accounts, investment accounts, real estate, private business and more – that give your family the chance to create funds to support your goals.

Future planning is a complex and uncertain series of actions taken over time. Financial planners take all these ideas, resources and considerations to help understand whether you are on track, or not, to support yourself and fund a trust for your family member with a disability. Armed with that information, you can work with your financial planner, lawyer and CPA to put strategies in place to provide for your needs and your family member’s future needs.

Putting a comprehensive plan in place and taking action helps you as you plan to help your family member. Planning reduces stress for you as it gives you a way to track progress. Your future self will thank your current self over and over for the work you start. So get started.

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This article is not intended as investment advice or representative of any specific investment strategy. Consult with your legal, tax, benefits and investment team before taking any action.