Succession Planning for Special Needs Family Members

by Sequoia Financial Group
by Sequoia Financial Group

Does your family have a succession plan? It may seem odd to ask a question that is typically associated with businesses. But for families with loved ones with developmental disabilities, it is a critical question to ask … and answer.

Especially as many people with special needs are living longer, fuller lives, the need for detailed, thoughtful succession plans has taken on increased importance. As people with developmental disabilities live longer, their care needs can grow increasingly complex. Who in the family will take on which roles after mom and dad have passed? Who are the advisors and external resources the family will lean on to provide the holistic care and support special needs family members need as they age?

Those are just a couple of the questions a carefully thought out succession plan can answer. For families with significant wealth, that planning takes on even greater importance as it can be core to the successful execution of a detailed estate plan.

We recently connected with Alexandria Nadworny, CFP®, CTFA, Vice President and Wealth Advisor with Sequoia Financial Group, to further explore the importance of succession planning for special needs family members and what that planning should entail:

Alex, as people with special needs are living longer, that can mean greater complexity in their care, as well as who provides that care. How do you see this playing out for families of those with special needs?

This demographic change is really twofold. Not only are those with special needs living longer, but often so are their parents. When parents are no longer able to care for their special needs children, that presents an additional layer of complexity for a family to work through. Essentially, a family needs to plan for both eventualities. Needless to say, that’s a tremendous responsibility and one that requires advanced planning.

Adding a potential further complication is how geographically dispersed families are today, If the siblings or cousins or aunts and uncles are not in the same city or state as the person with special needs, who takes on the role and responsibility of caring for the family member with special needs when the time inevitably comes? As you can see, this requires all members of the extended family to be involved with succession planning so that they are aligned on roles, responsibilities and expectations going forward and more planning for those with no extended family.

Even if you are a family of significant wealth and have the resources to pay for high levels of care, it’s still necessary to do the proper planning in order to enable the family member with special needs to have access to the types of daily activities that are most beneficial for them. For example, attending a community-based program with peers may require that the special needs family member be on Medicaid. That is just one example of what should be included in your succession planning.

Alex, your family is experiencing this dynamic first hand in planning for the care of your brother. Can you share what that has been like and how you are planning for the future?

Planning for our family has evolved over the years. That is very important to understand. A succession plan is not a “one-and-done” type of planning process. As my father is approaching retirement age, our conversations have changed. When it came to carrying for my brother, my parents used to essentially say, “Don’t worry about it. We got it.” Now, we are facing the reality that my other brother and I will need to and want to take on a greater role on behalf of my brother with special needs. As a family, we are redefining what that looks like. Doing so allows each of us to clarify how, and to what extent, we want to be involved. It’s critical to document those conversations and ensure everyone is on board so no “balls are dropped” on behalf of the family member with special needs.

Be candid and transparent when having these discussions so that everyone is on the same page and no misunderstandings exist. No one should feel “forced” or put upon to take on responsibilities they don’t want. Their involvement should align with their ability to deliver and come from a place of love. That is so critical to ensure the person with special needs actually receives the ongoing care and support they need.

Can you expand on the concept of succession planning within a family and what exactly it entails?

At its core, a succession plan involves continuous conversations about the future that is rooted in what’s happening today. Again, this is not a one-time exercise. It’s an ongoing process. At the outset, the family should align around a clear long-term vision for the family member with special needs and what their life can and should look like. A letter of intent is a great way to start the process, as it provides a beautiful way to share the special needs family member’s story and the extended family’s hopes for the future.

Once a vision is in place, incorporate it into your estate plan and review it with your estate planning attorney and wealth advisor. That is particularly important for high-net-worth and ultra-high-net-worth families.

It’s also important to note that a succession plan can have both formal roles and informal roles. The formal roles can include trustee, power of attorney, health care proxy, guardian. The informal roles can be social workers, companions, friends, etc. All of these roles should be spelled out in a succession plan. It’s equally important that everyone who has a role is aware of their responsibilities and expectations. Succession plans should not sit idle on a shelf. They need to be communicated and discussed regularly.

If trusts are created for the family member with special needs, who you choose as a trustee is particularly important, more so than with a typical trust. You want a trustee who truly understands the beneficiary and is compassionate and creative in how to meet that person’s needs long-term.

Finally, when creating a succession plan for a special needs family member, don’t neglect to capture even the most minute of details, as they can take on huge importance. For example, my brother has a special black shirt that he must wear to bed every night. It’s not a good situation if bedtime comes and the black shirt is missing! As a family, we all know this. We also know that whoever provides his care in the future needs to know that having that black shirt is non-negotiable. That’s why it’s part of my family’s succession plan.

Planning for a special needs family member is a lot, even in the best of circumstances. Who can / should these families lean on for help in succession planning? What happens if you put it off and don’t do this?

Families should consult with a wealth advisor experienced in special needs planning, particularly on how a family’s vision will be funded. An advisor should fully understand and appreciate the vision for what you want your family member’s future to look like. With that, a qualified wealth advisor can help coordinate the necessary professionals and resources to successfully implement your succession plan and work with your family ongoing as life inevitably changes.

Lastly, I want to provide a strong word of caution that if a special needs family does not have a succession plan in place, that very often leads to an eventual crisis with significant financial consequences. If the primary caregiver of a special needs family member passes without a succession plan in place, it can drastically increase the likelihood of courts becoming involved. Not to mention the enormous stress on the family, especially the family member with special needs. Sadly, that scenario plays out all too often, but it can be avoided with a thoughtful succession plan in place well in advance of it being needed.

Contact us to further explore how to develop a succession plan for your special needs family member.

The views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.