Financial Planning for Families With Special Needs Children

Written by Natasha Combrink

Updated on May 3, 2024

• It’s essential to consult with financial planners specializing in wealth management to secure the necessary resources for your disabled child’s future.
• You should regularly review your financial goals with your planner to ensure your child’s care needs are met without compromising your own retirement.
• Building the right team of legal and financial experts will help you set up effective financial and guardianship or conservatorship plans.
• Ensure that your financial strategy includes long-term nursing home care provisions if your child’s condition requires it. 
• It’s important to understand the eligibility and application process for public benefits to maximize support for healthcare, education, and daily living expenses. 

When your child is born or diagnosed with a disability, you know that the life you’ve planned will change—not just emotionally but financially as well. 

The journey ahead will require more than love and patience. Careful, strategic planning is needed to ensure your child can thrive. 

Special needs financial planning secures the present and builds a stable future for children with disabilities. 

With the right plan, you can ensure your child’s needs are met, even when you’re no longer there to care for them personally. 

Assessing Your Financial Situation

Step one in financial planning is clearly understanding your current financial status. Without this understanding, you can’t build a brighter financial future for your special needs child. 

To determine your current standing, ask yourself these questions:

• What are my existing income and expenses? Do I have money left after paying all expenses to pay for my child’s needs?
• Are there any debts I need to manage now so that they don’t become a problem in the future?
• How and where can I reduce spending to make room for new costs concerning my child’s needs?
• Did I consult with my child’s doctor or therapist to understand equipment and treatment needs in the future? 

It’s wise to plan not only for current expenses but for future ones, too. 

Government Benefits and Eligibility

You may be eligible for financial assistance through the government if your child has a disability and you meet other requirements.

SSI and SSDI

Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) are programs designed to help you pay for the basic needs of your disabled child if you have little to no income. 

SSI is based on age or disability and limited income and resources, while SSDI is determined by disability and work credits. 

You may qualify for both benefits if you have limited income and resources and a work history. 

Medicaid and Other Health Benefits

Medicaid provides healthcare coverage to individuals and families who meet specific income conditions. 

With Medicaid, you can cover healthcare costs like doctor visits, hospital stays, and even long-term medical care. 

Other services that are crucial for your child’s disability but expensive, like physical therapy, counseling, and necessary surgeries that basic insurance possibly won’t cover, might also be paid through it. 

You can apply for Medicaid directly with your state or through the Health Insurance Marketplace.

Legal Planning and Guardianship

Legal planning and guardianship are important, especially when it comes to taking care of someone who can’t make all their decisions by themselves, like a child with special needs. 

This includes making sure there’s a plan for their money and property and figuring out who will make decisions for them so you know they’re protected and looked after no matter what happens. 

Special Needs Trusts (SNTs) are a type of legal setup you can create to ensure assets like property, money, or life insurance policies your special needs child will inherit are held in a separate account dedicated to supporting their needs. 

The idea behind this is to transfer ownership of these assets to your child without it being counted toward their eligibility for government benefits. 

There are two main types of SNTs: first-party and third-party. 

First-Party Special Needs Trust

This trust is set up using your child’s own money, usually from a personal injury settlement or inheritance. It pays for extra expenses that government benefits don’t cover, like personal care attendants or recreational activities. 

To ensure this type of trust doesn’t affect Medicaid or SSI eligibility, it must be set up:

• While your special needs child is under 65.
• As irreversible.
• With a provision that any money left over when your child passes away will be paid back to the government for the benefits they received. 

Third-Party Special Needs Trust

Someone else sets up this trust with their own money to benefit your special needs child. You, grandparents, family, or donations can fund this trust. 

There are no age requirements, and the person creating the trust can decide what happens with any remaining funds if your child passes away. 

Guardianship and Conservatorship

Guardianship and conservatorship are essential parts of estate planning. 

In most states, after turning 18, children no longer need a legal guardian, but children with special needs may require ongoing support into adulthood. This can include help with managing their finances, legal matters, and day-to-day activities. It’s essential to consider these aspects.

Guardianship is a request you make to gain legal authority over your child’s daily life decisions. It gives you the right to make important choices about their health care, education, living arrangements, and employment. 

Conservatorship is similar but specifically focused on managing your child’s finances and legal matters. You’ll be responsible for safeguarding their assets and fulfilling duties like filing taxes, receiving social security and disability checks, and managing their financial resources properly. 

You and your partner can file a petition for either or both when your child is an adult as co-guardians and co-conservators. If you’re the primary caregiver, you’ll serve first, while your spouse will be named as an alternate or standby if you pass away or become unable to perform your duties. 

You can also include additional standby guardians and conservators like adult siblings or a family member. 

The court will first determine if there’s truly a need for guardianship or conservatorship after reviewing evidence that it’s necessary to ensure this is the best option for your special needs child. 

If granted, you might also need to report back to the court regularly to show how you manage the responsibilities of your role and provide evidence that you’re acting in your child’s best interest. 

Housing, Education, and Therapy Costs

Finding the right living arrangement will improve your child’s quality of life. Depending on their needs, different options are available for housing and long-term living arrangements. Here are some you can consider:

• Home Modifications: Adapting your family home to be more accessible can allow your child to live in a familiar environment. Modifications might include ramps, widened doorways, special bathroom equipment, lighting adjustments, rearranging furniture, and eliminating safety hazards. 

Living with parents or a family member in a familiar and caring environment should always be the first option. Alternative arrangements should be available if you or any willing family member cannot care for your child. 

• Group Homes: Supportive residential homes where small groups of people with similar disabilities live together are suitable for people who don’t need advanced care but can’t live independently. 

They can offer your child a balance of independence and support, with staff and counselors available to assist daily. 

• Assisted Living Facilities: Your disabled adult child can live in their own apartment if they need some help with daily activities but not constant supervision. Assisted living offers a community setting with different levels of care.  

• Nursing Homes: A nursing facility provides around-the-clock skilled medical care. This is a good housing option if your child needs high care and daily assistance. 

Having a special needs child makes detailed financial planning even more crucial to ensure safe and beneficial living conditions, special education, and access to good therapy. 

A special needs trust can own a home for its beneficiary or pay for their rent in a private living facility. It can also pay for services to help them live independently. Setting one up for your special needs child is incredibly beneficial. 

These trusts can also fund education and additional therapy costs without jeopardizing eligibility for other benefits. 

Besides creating a special needs trust, you can also:

1. Apply for government programs, like IDEA (Individuals with Disabilities Education Act)¹1. Individuals with disabilities education act (IDEA). Individuals with Disabilities Education Act. https://sites.ed.gov/idea, to provide funding for special education needs.

2. Apply for scholarships and grants available specifically for people with disabilities that can help cover educational costs or specific therapies like speech, occupational, or physical therapy. 

3. Open an ESA (Education Savings Account)²2. What is an Education Savings Account (ESA)? EdChoice. https://www.edchoice.org/school-choice/types-of-school-choice/education-savings-account to save tax-free for schooling and therapeutic needs. 

4. Review your health insurance plan to understand what therapies and services are covered and whether supplemental insurance might be necessary to cover any gaps. 

5. Consult with a certified financial planner who specializes in special needs planning and can provide personalized guidance. 

Insurance Planning

The primary role of life insurance is to ensure financial security for your special needs child after your death. 

Special needs children, who may have limited capacity to care for themselves, face higher living costs. Life insurance benefits can help alleviate these costs and provide for their needs. 

You can set up a special needs trust for your child and name it the policy beneficiary to protect their eligibility for government benefits. A trust also allows you to set out specific conditions for how and when funds may be used to care for your child. These instructions will be followed after your passing. 

Long-term Care Insurance

Long-term care can be expensive. While your child may be eligible for certain medical and non-medical long-term care services included under Medicaid, they might still require additional services that are not covered. 

Here are more reasons why long-term care insurance is essential:

• Protects Savings and Assets: When you don’t have an insurance plan, long-term care can quickly drain your accumulated savings and assets. This can impact the quality of life and financial security not just for you but also for your special needs child. 

Long-term care insurance can help protect your assets and finances by covering all out-of-pocket costs. 

• Flexibility of Care Options: Long-term care insurance can increase your choices of where and how your special needs child receives care. It can cover care in your own home, a community organization, or specialized residential facilities. 

• Relieves Burden on Family Members: Without this type of insurance, the responsibility of care falls not only on you but other household and family members. This can be physically, emotionally, and financially draining. Long-term care insurance eases this burden and can improve the quality of relationships and family life. 

• Peace of Mind: Knowing you have a plan for potential long-term care that your special needs child might need can keep you and your family at peace. 

Saving for the Future

Having a plan for future expenses will give you peace of mind, knowing your special needs child can continue to thrive and receive the care they need, even as they grow into adulthood or if something happens that stops you from being there. 

Here are two ways to do this:

ABLE Accounts

An ABLE account is a tax-free savings account³3. What are able accounts? ABLE National Resource Center. https://www.ablenrc.org/what-is-able/what-are-able-acounts/ specifically designed for people with special needs and their families. It allows you to save and invest money without affecting your special needs child’s government benefits or Medicaid eligibility. 

ABLE accounts are an excellent way to save for current or future special needs expenses and provide additional support to publicly funded benefits to help your disabled child maintain health, independence, and quality of life. 

If your child is still a minor or a major who’s unable to do so, you can open an ABLE account for them. All earnings on ABLE accounts are tax-deferred, and withdrawals are tax-free as long as they are used for qualified disability-related expenses. 

ABLE accounts are a fantastic way to supplement publicly funded benefits but don’t replace them. 

Retirement Planning

Planning for retirement while balancing the long-term needs of a special needs child can have unique challenges. You need to secure your own wealth without jeopardizing the care and support your child needs.  

It’s important to clearly understand your family plan, your child’s plan, and the government benefit system to ensure your financial security and provide for your child’s future. 

Proper retirement planning includes estate planning, such as setting up wills, trusts, and other legal structures to protect direct assets that can be used to care for your child without affecting their eligibility for government benefits. It also includes ensuring continuity of care when you’re no longer able to do so due to age, health issues, or death. 

Coordinating these factors will help you make sound decisions that will benefit you and your child long-term. 

It’s important to note that retirement planning for parents of children with special needs is complex, and it is best to contact financial advisors specializing in serving families with special needs.

Proper planning will allow you to retire securely and peacefully, knowing you’ve set up a structure that will continue to support your child throughout their life. 

Securing Tomorrow Through Smart Financial Strategies

The goal of special needs financial planning is to manage present challenges and to pave a path for continued success and well-being. 

If you take proactive steps today, you can secure your child’s future and ensure they have the resources to thrive long-term. 

With the right plans, you can rest easier, knowing your child’s future is safe and secured with care, dignity, and full support. 

References

1. Individuals with disabilities education act (IDEA). Individuals with Disabilities Education Act. (n.d.). https://sites.ed.gov/idea
2. What is an Education Savings Account (ESA)? EdChoice. (n.d.). https://www.edchoice.org/school-choice/types-of-school-choice/education-savings-account
3. What are able accounts? ABLE National Resource Center. (n.d.). https://www.ablenrc.org/what-is-able/what-are-able-acounts