Special needs planning had been in the back of Rajput's mind since her niece was diagnosed with autism in the late 1970s. Then in 1989 she discovered three clients had special needs children and no clue what to do. "That put a bug in my head that I had to do something," says Rajput, a pioneer in the field who has assisted over 800 special needs families nationwide.

Beloff and Rajput are big fans of special needs trusts, also known as supplemental needs trusts, which were established by the Omnibus Budget Reconciliation Act of 1993 (OBRA '93). Properly structured, a special needs trust can protect benefits and pay for anything except the basics covered by SSI (food and shelter). It covers medical expenses not covered by Medicaid, and also covers travel and an advocate or companion. With the trust, for example, you could take the child with special needs to a ball game, but you could not buy him a hot dog, says Beloff.

Parents often fund special needs trusts with permanent and term life insurance. Many of them use a second-to-die policy, which is even available to divorced parents and parents who've never married, says Beloff.

Rajput strongly advocates making a special needs trust stand-alone rather than burying it inside the parents' estate trust. Let's say a child's mother dies and then her grandmother dies, leaving money to help pay for her care. But since her special needs trust is inside her parents' estate and her father is still alive, it isn't activated yet. "You have the pot and coffee but nowhere to put it, no cup," she says.

Parents should seriously consider whether making the child's sibling the trustee and the ultimate beneficiary will pose a conflict. While trusts with over $1 million in assets often use a corporate or bank trustee, an option for special needs trusts with less assets is a pooled trust. Examples include the Planned Lifetime Assistance Network (PLAN) of Connecticut and the UJA-Federation of New York Community Trust for Disabled Adults. With a pooled trust, a portion of the assets may have to be donated to an organization, says Beloff.

Parents should do special needs planning early, before they start running out of money themselves, says Rajput, who recalls that many who attended her first workshop were in their 60s. She also notes that none of her clients who've passed away adequately prepared their other children for their role as guardian of their special needs sibling.

Both she and Beloff encourage special needs clients to draft a letter of intent, a non-binding planning tool that can include a child's rituals, family medical history, future job offers and other information. "It's basically a love letter to a future caregiver. ... There's so much tremendous knowledge locked in parents' brains," says Beloff.
Adulthood Challenges
Under the Individuals with Disabilities Education Act (IDEA), children under age 21 who haven't graduated from high school have the right to a "free appropriate public education." After that, parents in most states must prove their child qualifies for resources and find them on their own. "It's a much different world and parents usually are not prepared for that," says Beloff.

He encourages parents to get involved with their local service agencies before their children transition to adulthood. "These are the people who'll be looking after your children for the rest of their lives," he says. Since 2003, he has served as a director on Abilis, an agency for people with developmental disabilities and their families in lower Fairfield County, Conn.

Rajput is glad Michigan funds special needs education until age 26-the only state to do so, she says. A tough topic she's broached with clients is getting housing matters settled sooner rather than later. "Even if it's heart-wrenching, you may want to start a residential separation. Love is tough. But you don't want a child to go backwards when a parent passes away," she says. A client who wants to get her daughter set up in an apartment told her, "I want to be close enough to pick up the pieces when she falls. I can't do that when I die."

Some of the most difficult cases involve mental illness, says Rajput. "It's different from a financial planning view and how you approach parents." Parents are typically older, since illnesses such as schizophrenia and bipolar disorders often don't present themselves until adulthood. Constant tension may be present if the child won't acknowledge the disease or has alienated siblings. It's also harder planning for someone who isn't always disabled and may have assets.