Put First Things First

When flying on a commercial airline, we get safety instructions from the flight attendant prior to takeoff. We are all very familiar with the phrase: "If the oxygen mask drops down, put your mask on first and then help others." Special needs planning is the same. We must "put our mask on first" before we can help our family members with special needs.

Sometimes, when families approach special needs planning, they understandably want to prioritize the family member with the disability over themselves. But what would happen to the disabled family member if something occurred that impaired the caregiver's ability to care for them?

The caregivers need protection from lawsuits, disability, catastrophic medical claims, premature death, and proper legal work in place. They need a financial plan that will address their goals so they can retire even if they must fund a three-person retirement instead of a two-person retirement. 

When doing special needs planning, start with the end in mind. The goal is for the family to be successful in the three phases of money: accumulation of wealth, conservation of wealth, where we use wealth to fund our retirement, and then preservation of wealth, where we pass wealth on to future generations.

Some come to us when their special needs child is approaching legal adulthood. Situations like this require immediate action. Not establishing guardianship can create difficult situations down the road. Guardianship and/or conservatorship are a priority to establish well before the legal age of adulthood. 

Not having a formal legal plan and relying on the good intentions of friends and family can lead to what I call a 'morally obligated gift.' A person leaves money to friends or family to care for a loved one with special needs, but there is no legally binding requirement on how the money will be used. It could get wasted or spent on non-essential items. The money could be lost in a divorce. It could get invested unwisely. Too many things can go wrong with a plan like this.

Ultimately, the biggest mistake is not having a plan in place. Did you know that a person can become ineligible for government benefits if they own assets in their own name that total over $2,000? You must have a plan to keep your loved one with special needs eligible for government benefits. There is no way of knowing if they will ever need the benefits. Medicaid is especially important because many people don't realize that when they pass away, their health insurance eventually goes away, too. 

The last common mistake we see is that a person ends up doing their planning with an advisor or attorney who does not specialize in this type of planning. It only takes one small mistake to cause a person to lose access to government benefits.

Act as soon as possible. Work with me or someone like me who specializes in this type of planning. And "put your mask on first."

Registered Representative of, and Securities and Investment Advisory Services offered through Hornor, Townsend & Kent, LLC (HTK), a Registered Investment Advisor, Member FINRA/SIPC. 600 Dresher Road, Horsham, PA 19044 phone: 800-873-7637 Penn Mutual Wealth Strategies is unaffiliated with HTK. HTK is a wholly-owned subsidiary of The Penn Mutual Life Insurance Company. Wealth Coordination Partners is unaffiliated with HTK. 6431650RG_Mar26