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5 Money Mistakes Parents of Special Needs Kids Make

5 Money Mistakes Parents of Special Needs Kids Make

Children with special needs require a lot of attention and care, so parents need to be extra careful when planning their future so as not to make any plans that will put their child in jeopardy or have a serious, long-lasting effect on the child.

In some instances, when the child grows, he or she may not be able to qualify for vital benefits from the federal government or the parents might die without making monetary provisions for the child. This article is centered on parents of special needs kids and the mistakes they make when planning their estates.

1. Disinheriting the Child

When children with special needs reach adulthood, they tend to rely on the federal government to help with their fundamental needs like food and shelter. This is often done through federal means-tested programs (a program in which the recipient’s financial resources determines the eligibility) like Supplemental Security Income (SSI) and Medicaid.

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Parents are often advised to disinherit their child to enable them to qualify for the federal programs. This advice is not really the best for a special needs child because these federal programs offer very low finances. A special needs child may not be able to work to get additional money to help out like their counterparts who do not have special needs.

It is more advisable for the parents to open a Special Needs Trust (Supplemental Needs Trust) for their child. The parents can put money in the trust for their child without any risk of disqualifying the child from benefitting from federal programs.

Other family members or well-wishers can also leave money in the trust or set up another one. Also, if the parents die or become impaired, the child’s trust will be able to support the child.

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A Special Needs Trust needs to be set up by an experienced attorney to avoid complications. It is important not to do it on your own; an attorney can help you align your life insurance, retirement accounts, and other beneficiary accounts with the Special Needs Trust of your child.

2. Procrastinating

Parents need to plan in advance for a time when they’ll die or simply won’t be able to cater financially for their child. Since nobody knows what could happen tomorrow, the earlier we plan, the better we can secure our children financially. Parents who do not plan ahead could die and end up leaving their special needs children with no resources to maintain the standard of living they were used to. Especially for parents who own businesses or do freelance work, setting up automatic systems for taking care of business concerns needs to be done today, not tomorrow.

3. Not Making Your Planning a Team Effort

Parents cannot work alone when making an estate plan for a special needs child. The process is very complex and therefore requires the services of people experienced in special needs planning to make sure the plan goes well. They need an attorney with experience in special needs, a life insurance professional that will help plan the money needed to increase the benefits needed for the child, a CPA to prepare the tax return of the trust, an investment adviser to manage the finances so that the money in the trust fund will last for the whole of the child’s life, and also any other advisers that may be able to help in the success of the trust.

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4. Ignoring the Particular Needs of a Special Needs Child

Plans that are focused on the particular needs of a special needs child have to be made. If the planning doesn’t meet their needs, the child will not qualify for government benefits. Setting up a proper Special Needs Trust will satisfy the child’s needs and also allow the child to be eligible for benefits. The trust must satisfy a lot of needs, like medical bills, annual check-ups, any special equipment (like a specially equipped van), training, education, insurance, transport, and feeding.

A properly funded Trust will go much further in providing the child with electronic equipment, appliances, and computers, fund vacation trips for them, allow them to go to the cinema and have a good living situation, and provide many other things that a parent wishes for their child to improve their quality of life.

A generic or “form” special needs trust has very strict distribution policies, and so the child may not be exposed to some things that he or she would normally have enjoyed.

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5. Including a “Payback” Provision in the Trust

Payback in the trust means that if the child dies, any money remaining in the trust is given to the government and not the family. This payback clause is a mistake made by most parents. An experienced attorney can be employed to make sure that money left goes to the family instead of the government.

Featured photo credit: Visit St. Pete/Clearwater via flickr.com

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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