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Planning Gap Seen For Children With Special Needs

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Sixty percent of parents of special needs children dont expect their children ever to be financially independent, a recent survey by MetLife Inc., New York, finds. Yet 68% do not have a written will, and 29% have not planned for their disabled childrens financial future, according to the survey.

The companys Division of Estate Planning for Special Needs Kids, which it calls MetDesk, conducted the survey to see how parents of special needs children are coping. These parents badly need professional financial advice, MetDesk concluded.

Most of the parents in MetLifes survey had one special needs child; 15% had two such children, while 3% had three or more.

MetLife found 49% of such children are covered by private health insurance. Among parents, 41% pay some of the premium, either through their employer (91%) or on their own (9%). Forty-one percent of cases are covered by Medicaid, while 27% are covered by a state-sponsored health insurance plan. (Some had multiple sources of coverage.) But 8.5% of special needs children have no health insurance.

Even with insurance, the strain on family resources is often significant. On average, parents spend $326 per month on out-of-pocket medical expenses.

What happens to special needs children after the parents pass away emerged as a key issue from the survey. MetDesk found 84% of parents had not provided for lifetime financial assistance for their special needs kids, and 88% had not set up a special needs trust to keep their child eligible for government benefits.

(Generally, to qualify for Medicaid and SSI benefits, the financial assets of a disabled individual must not exceed $2,000. For that reason, families who wish to provide more than the bare necessities often establish special-needs trusts, which are exempt from the asset limitations. The trusts usually are backed by life insurance on one or both parents.)

Those with children who are expected to be financially dependent into adulthood were concerned about providing a good quality of life, keeping eligibility for government benefits and providing lifetime care.

No plan for the future had been made by 29% of parents. Fifty-three percent had not identified a guardian, 68% had not written a will, 72% had not identified a trustee and 73% had not begun setting aside money for their special needs children.

When asked to name their principal source of advice in planning for the future of their disabled children, 46% cited medical professionals and 39% named the Internet. Only 12% said they consulted attorneys, while 10% cited insurance agents, 9% financial planners and 5% accountants.

Financial advisors wishing to serve this needs market can begin by offering seminars for parents on the basic requirements of financial planning, suggests Nadine Vogel, vice president of MetDesk. MetLifes specialists offer workshops through parent support groups and conferences.

The next step is to meet with the parents individually, Vogel says.

“Its a process by which we understand the issues, the childs prognosis and what the familys needs are,” she says. “Creating a plan to protect the future for special needs children can be complex.”

“Its not cut and dried,” agrees John Nadworny, a principal of Special Needs Planning LLC, which is a unit of Bay Financial Associates LLC, Waltham, Mass. “Everyones abilities and needs are different.”

Nadwornys advice for the advisors initial interview with the parents: “Ask tough questions. By asking questions, you help draw out a persons emotions. Once you work through the emotional phase, you can get to hard facts and numbers.”

Buying a large life insurance policy for the primary caregiver is only one concern, Vogel says. Other issues: who will make decisions on behalf of their child after theyre gone and how eligibility for government benefits can be protected while still assuring financial support for out-of-pocket expenses for their child.

Once the financial plan is in place, the advisor should plan to hook up with special needs attorneys, Vogel says. Among the documents the attorney should draw up: a letter of intent with instructions to whomever is to oversee care about medical care and desired living arrangements.

Reproduced from National Underwriter Edition, April 8, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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