6. Adequately funding the trust.
There are two aspects of this issues:
How much money does the trust need to take care of the child? And,
How is the trust funded?
The most efficient way to determine the amount of money needed to fund the trust is to break it down into four parts:
Transitional expenses that will be incurred when you can no longer care for the child.
Expenses the parents are currently incurring.
Expenses being paid by public and private resources; and,
Assistance for the guardian/caregiver
Once you have an idea of how much money is needed in the trust, you can address the issue of how to fund the trust. Technically anything of value can be used to fund the trust. The trust can be funded with savings and investments as well as real estate. The trust can be the beneficiary of your retirement account, be it a 401k, 403b, TSP, or an IRA. However, retirement accounts can create adverse tax consequences. Candidly, most families cannot afford to give away what they have accumulated. They are going to need everything they have when they retire, and, knowing what it will be worth at their death is uncertain due to the increase in life expectancy, inflation and the possibility of needing long term care.
Life insurance is the preferred funding instrument for most families; it allows familiesto enjoy their retirement and not worry about spending their money on themselves to the detriment of their child with a special need.