Protecting Your Adult Child’s Lifestyle From the Unforeseen

Long-term incentives and material success provide many protections. Two things remain beyond our control: predictions for the future and the fact that in the natural order, our children will outlive us. Fortunately, the financial advisors at SFG are familiar with the issues faced by parents of special needs children and can coordinate the planning, outside advisors and additional resources to provide a seamless conversation.

Paul and Lisa feel blessed to provide a good life for Amanda, 12, and Ryan, 5, and to spend quality time with their family. Lisa has taken time off to raise Amanda and care for Ryan’s special needs full time.

At age 48 and 45, Paul and Lisa look forward to living off their pensions, retirement savings and Social Security benefits when he retires at 62. Paul has substantial long-term incentives, including Nonqualified Stock Options (NQOs) and Restricted Stock Units (RSUs). In addition to Paul’s benefits, Lisa can draw from a small pension and retirement savings accumulated over her 13-year career.

They manage their expenses well without a formal budget. They are unsure if these income streams will cover their own needs as well as Ryan’s and Amanda’s, should something happen to them. They prepared a simple will; however, it is time to do some estate planning. They would like to understand if they are accumulating enough to support Ryan for the rest of his life.

Nothing has been formalized, but they have a broad outline of what would happen when they’re gone.

They want to explore alternative housing for Ryan – whether a group home or with a caregiver -- and have Amanda look after Ryan while continuing to fulfill her own dreams. By the time they retire, Amanda will be presumably out of college and on her own. Amanda shouldn’t have to put her life on hold as a parent might to care for Ryan; she will likely have a family of her own.

They envision leaving their estate to Amanda, with the intention that half would be for Ryan’s care. They have accumulated a fair amount of assets and hope it will be enough to finance their retirement and an inheritance for Ryan’s special needs. As much as they trust Amanda, she is still young and life can be uncertain. They wouldn’t want any of Amanda’s financial pressures to redirect resources away from Ryan’s lifetime care. How can they formalize their plans for Amanda to protect Ryan’s half and deter the influence of a future spouse or ex-spouse?

They are interested in meeting with an SFG financial advisor who can answer their questions and, as a Certified Financial Planner CFP® with expertise in long-term incentives, can confidently bring all of their plans together. Some of the questions that arise from conversations with their friends are:

  • Should they provide family members with a Letter of Intent that outlines their intentions as to Ryan’s living situation, medical care, education and religion?
  • Would leaving the estate to Amanda preserve Ryan’s ability to qualify for medical benefits?
  • Should they set up a Special Needs Trust for Ryan’s care and how should they fund it?
  • Would it be in their interest to set up an ABLE account for Ryan?
  • How compatible are Paul and Lisa’s preferences for residential care facilities for Ryan?
  • Should Paul’s long-term incentives fund Ryan’s care?
  • When should Paul exercise and sell his NQOs or sell his vested RSUs?
  • Can our financial advisor recommend an estate planning attorney?

Fortunately, the financial advisors at SFG are familiar with the issues faced by parents of special needs children and can coordinate the planning, outside advisors and additional resources to provide a seamless conversation.

*The name, likeness, and circumstances in this example are a fictional composite of facts from executives similar to actual SFG Clients.

Matthew P. Witter, CFP®, ChFC®, AIF® is Senior Vice President, Lead Advisor/Investment Specialist, SFG Wealth Planning Services, Inc., SFG Investment Advisors, Inc. Matt is responsible for developing financial plans for executive clients, along with providing lead advice to the firm’s Executive Planning Services and Financial Independence Planning Services clients. Matt serves as co-chair of the firm’s investment committee.

Executive Compensation, Non-Qualified Deferred Compensation, Restricted Stock Units, Retirement Planning, Special Needs Planning

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