by Steve Morris

Step 1: Decide What the Future Looks Like for Your Child

You must first decide what you want in the future for your special needs child after your death or when you become unable to continue caring for your child due to your own disability. You and your child should focus on such questions as where he/she will live; whether some kind of employment is expected, future education plans, and then other specific kinds of information such as your child’s social life and religious preferences should also be addressed. Finally, any special medical care issues should be thoroughly discussed at this stage in the process.

Step 2: Write a Letter of Intent

Write a “Letter of Intent” for your child. This letter is a document that parents complete that will put into their own words their hopes, desires, and goals for their child. The primary focus here is to put into a single document sufficient information to provide the needed guidance to your guardian, advocate, and trustee of your child’s special needs trust (discussed later). The letter will be based upon the decisions made during the family’s discussion of the issues noted in step one. For a more complete background of the letter of intent, go to the following link:, which discusses in great depth the development of the letter.

Step 3: Choose an Advocate and Guardian for Your Child

Choose an advocate and possibly a guardian for your special needs child. This is the person (or persons) who will be responsible for carrying out your wishes as expressed in your letter of intent. This person can be a family member such as another adult child, a relative, friend, or any other trusted party including a charitable group, commercial organization, or public guardian. The basic role of this person is to step into the parent’s shoes as much as possible and then see to it that all elements of your letter of intent are carried out. Whoever is chosen must obviously be someone who you trust and ideally also has a strong current relationship with your child.

Step 4: Determine the Costs of Your Child’s Life Plan

Determine the realistic costs for the development of your child’s comprehensive Life Plan. In developing a Life Plan for a special needs child, the parents will usually incur some upfront costs such as financial planning and legal fees, which can range from several hundred dollars up to many thousands of dollars, depending upon both the complexity of the parent’s financial planning as well as the expertise of the professionals utilized. For example, there are numerous organizations around the country that specialize in special needs planning and accordingly offer a package price for the delivery of all services, including legal fees in many cases.

On the other hand, families may end up working with several different unconnected professionals who may not specialize in this area, and therefore, their fees for services could be much higher due to the added research time they might incur as well as the inherent inefficiencies of different professionals doing their work independently of each other. To obtain assistance with some or all parts of Life Plan development, it’s usually wise to find someone or an organization that specializes in the area since this is one area of your planning where you can’t afford to make a mistake.

Parents should also check with their local and state organizations to see if a “Master” or “Community” special needs trust has been established (under federal law) at either the state level or by a local charitable not-for-profit organization that focuses on the disability community. If available, this can provide a much less expensive option for many parents with more limited resources. Planning is still required but using this approach will allow you to avoid the cost of setting up your own special needs trust.

Step 5: Determine the Level of Funding Required for Future Needs

Determine the level of funding that will be required to meet the future needs for your child. To determine your child’s needs, you should first examine all aspects of your child’s future care needs with a particular focus on the cost of providing all the goods and services he or she will require. This is always a difficult task since there are so many unknowns in the future. However, in spite of these unknowns, it is always better for the parents to go through this analytical process rather than some unknown but well-meaning government bureaucrat.

A good place to start is to develop a budget for your child based upon the assumption that you are now deceased (see “Supplementary Expense Worksheet“) and then account for the information determined in steps one through three. This allows you put a dollar amount on all aspects of your child’s care so that you end up with a determination of how much additional funding you will need to provide in order to assure that your child has a good quality of life.

Next, you will need to examine your own personal financial planning situation. At a minimum, this should entail the development of a personal financial statement so that you can see how much of your estate would be available for funding your child’s future needs deficit. Ideally, some kind of trust fund analysis should be completed to determine your funding target.

Step 6: Prepare Your Last Will and Testaments

Prepare carefully worded Last Wills and Testaments for both parents and other appropriate legal documents such as powers of attorney (POA) for both parents as well as consideration of the need for a guardian or a POA for your child. The key element here is that you should have “pour over” wills that leave nothing to your special needs child, but instead, leave his or her share to the previously mentioned legal device called a special needs trust which is addressed in the next step.

Step 7: Establish a Special Needs Trust

Establish a “Quality of Life” special needs trust for your child which will hold and manage all funds left to your child for the rest of his or her life. Ideally, the trust should be a “living” trust so that it can be used while the parents are alive, and it should also be fully “discretionary” so that it can’t be attacked as a “support trust” by the government authorities.

Another critical part of this step is the selection of “successor trustees” who will serve after you are gone. These are the people or professionals who will manage the trust fund for your child’s benefit. See the “Special Needs Trust Worksheet” for guidance on selecting successor trustees. If individuals are chosen as successor trustees instead of a professional trustee (which is commonly done), they need to be made aware of the unique fund management requirements of special needs trusts due to the income tax treatment of such trusts. So when individuals are chosen, it is often advisable to have an investment professional who is experienced in special needs trust fund management available to assist with the key investment decision making.

Once established, the special needs trust’s overarching purpose is to assure a “Quality Life” for your special needs child. It accomplishes this by protecting all current and future government benefit programs as well as providing for those areas of need not provided by the government programs. For example, if your child needs new furniture, the trust can pay for it; also vacations and guardianship costs can be paid for. If your child needs a medical procedure that Medicaid/Medicare doesn’t cover, the trust can pay for it. When properly drafted, these trusts have a lot of flexibility in paying for all those extra things that will enhance your child’s quality of life.

Step 8: Find Funding Sources

Once your child’s funding needs are determined (Step 5) and the special needs trust has been established (Step 7), it is now time to decide how you are going to actually fund your child’s trust. At this point, the main task is to select a combination of current and future resources that will be earmarked for your child’s trust. In Step 5, you determined how much the funding deficit was based upon your child’s needs as well as your resources. Now, you need to select which resources to earmark for your child’s trust.

The first thing parents need to know is that some resources are much better than others for funding the trust. For example, a major asset owned by many parents is a retirement plan (IRA, 401K, etc.), yet retirement funds are probably the single worst asset that parents can use for funding the special needs trust. The downside is due to the income tax burden of these funds when payable to a special needs trust. But an equally big problem is that many parents will use up these funds for their own retirement, which is their primary purpose. Most other kinds of investments such as savings, mutual funds, stocks, and bonds should work just fine. But if there are still deficiencies, then probably the best way to fill the gap is with life insurance, and usually, the best type of policy is one that insures both parents and is payable only after both are deceased (these are called “joint survivor” or “second-to-die” policies).

Step 9: Organize Life Plan Documents

Organize all Life Plan papers and legal documents into some kind of folder or notebook so that when it is time to update things, everything will be easy to find. You will want to have all relevant documents readily available such as your letter of intent, special needs trust, wills, POAs, guardianship papers, government documents/correspondence such as SSI and Medicaid card, information about funds earmarked for your special needs trust, and so on. This also makes it much easier for all the other parties who will be a part of your child’s Life Plan to get acquainted with your plans and what will be expected of them.

Step 10: Meet with All Parties Involved

Hold a meeting with all parties who will be involved with your child’s life so that they understand exactly what their respective roles will be and where you keep your Life Plan binder or notebook. Provide copies of relevant documents to each person who will be involved in your child’s life. For example, the first successor trustee should be provided a copy of the trust to acquaint themselves with the provisions of the trust. All parties should be given a copy of your letter of intent so that they can become familiar with your child’s entire Life Plan. Also, it’s usually a good idea to communicate in some fashion with all other immediate and extended family members (particularly grandparents) about the creation of the special needs trust in case they have a desire to leave something to your child. Please consult the following sample letter to friends and relatives about a special needs trust for an idea of what you need to say.

Step 11: Review Your Child’s Life Plan On a Regular Basis

Review your child’s Life Plan on a regular basis but at least annually. Many things can change in our child’s life and in the state and federal laws that govern benefits that he or she receives. It is often suggested that a good time to do this each year is on your child’s birthday or during the holiday season at year-end when thoughts naturally turn to family matters. If you decide to work with some professional advisers, you should also check with them to see if any financial or legal changes have occurred that would affect your Life Plan.

Step 12: Relax

RELAX! You are done for now, and all you have to do in the future is to review your plans as noted in Step 11.

Caveats and Disclaimers

The information provided here is not intended to be exhaustive on the subject of special needs planning. Entire books have been written on this subject, so the objective here is more limited in scope. It is our intention to provide sufficient information so that parents have a general understanding of the main issues involved and then know what steps need to be taken to achieve their goals for their child by creating a Comprehensive Life Plan. Where legal terms and devices are discussed such as special needs trusts, wills, guardianship, etc., it should be understood that this is not intended as specific legal advice, and accordingly, each family is always advised to obtain appropriate legal counsel when implementing these elements of a Comprehensive Life Plan for their child with special needs.