Divorce and the Special Needs Child: Blog Post 3


How much money will your child need in Trust to live a great life after you are gone?

Determining how much you need to put aside into your child’s trust begins with thinking about how you envision your child’s quality of life, what they may achieve, and where they want to live and with whom as they age.  You may have already included these things on your vision board, but now we need to put some numbers on paper to achieve your vision-board results!

A financial advisor will be especially helpful here.  They usually have software programs that can produce a dollar figure after a number of variables and financial assumptions are entered.  These programs calculate in the time value of money, which is critically important to consider. Keep in mind these numbers are estimates, or hypotheses, so I advise to err on the side of having too much as opposed to too little to allow for fluctuations in the investment returns and the economy.

In his book, “The Complete Guide to Creating a Special Needs Life Plan: A Comprehensive Approach Integrating Life, Resource, Financial, and Legal Planning To Ensure a Brighter Future for a Person With a Disability,” Hal Wright, CFP, recommends using these seven variables to determine the beginning amount (Net Present Value or NPV) of a Special Needs Trust. 

A simple example of how to calculate how much money is needed to fully fund the Trust is as follows:

If the child’s expected monthly expenses are $1000 per month, and he/she is expected to live 50 more years, we assume inflation will be 4%, and we assume investment returns of 6%, and the Trust will run out of money at the child’s death, the figure calculated is $385,258.00 needed to fully fund the Trust, assuming it is funded fully up front.

Of course, this is a very simplified version and does not account for changes in lifestyle throughout the child’s life, or for deposits made over time into the Trust.  A more accurate way to figure with those factors involved is to calculate what the estimated figures are for each year remaining in the child’s life, making adjustments each year for changes in lifestyle, or other major events…that calculation is too much to cover in this post, but you can find some spread sheets to help calculate these figures in Mr. Wright’s book, or a qualified Financial Advisor can assist you as well.  It is always a good idea to consult a professional, including a Tax Advisor, when developing your child’s plan.

Once you have an idea of how much money your child will need in Trust to live the life he/she desires, or that you desire for them, it is time to decide how it will be funded.  In the case of a divorcing couple, it may be as simple as setting aside a portion of the marital assets to fund the trust, assuming that there are plenty of assets to divide.  More commonly, it will take a funding plan that is negotiated between both parents.  That is where an experienced attorney, like those at O’Driscoll Keller Law Group, can be invaluable.  Skillful negotiations can make the difference in your family’s success getting through a divorce while still providing for a special needs child.

Recommended resources:

“The Complete Guide to Creating a Special Needs Life Plan: A Comprehensive Approach Integrating Life, Resource, Financial, and Legal Planning To Ensure a Brighter Future for a Person With a Disability,” by Hal Wright, CFP, published by Jessica Kingsley Publishers, copyright 2013, ISBN 978 1 84905 914 5.

“Financial Freedom for Special Needs Families: 9 Building Blocks to Reduce Stress, Preserve Benefits, and Create a Fulfilling Future,” by Rob Wrubel, CFP, published by Rosalibean Publishing, LLC, copyright 2017, ISBN 978-0-9966592-1-5.

Here is a website, that details how to find a Certified Financial Planner.

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