Special Needs Financial Planning: A Definitive Guide

Parents with special needs children know how expensive it is to raise their child. They know what care they can get, what financial aid they can get and what funded therapies and courses their children are entitled to. In short, they know the day to day costs of living with a child who has special needs.

But what about after the parents die? What then? The child will still need day to day care but who will provide it? Who will pay for it? And who will make the important decisions regarding the child’s healthcare?

There are many fears and stresses surrounding parents in this situation and it can seem daunting but if you prepare now then it leaves more time to enjoy the time you do have with your children.

Below are 10 ideas to help plan for the future for a special needs child. 

Set up a Special Needs Trust Fund

Supplemental Security Income (or SSI) is a monthly stipend that is available to children with special needs and Medicaid offers health insurance, however, to qualify for these benefits, the applicant (i.e, your child) must not have any assets worth more than $2,000 in their own name.

But, when you die, all of your estate and assets will be passed on to your children. Chances are that this will push them over the threshold and make the ineligible for SSI or Medicaid. This is where a Special Needs trust comes in. By setting up the trust, all monies and assets can safely be put into the trust and not into your child’s name. Meaning that your child will still benefit, but it won’t disqualify them for any benefits.

Talk to family members and friends

Family members may want to help with healthcare and educational costs of your children. But it is important for them to understand that nothing must be put in your child’s name.They cannot name your child as a beneficiary in their will or open savings bonds in your child’s name.Like wise, gifts of cash, checks or stocks must not be held in your child’s name as this will push them over the threshold for financial help.

If friends or family members wish to help financially, then ask them to name the special needs trust as the beneficiary in any wills and pay any cash gifts straight into the trust.

On a side note, the 529 college savings plan is usually not necessary for a child with special needs as this can only be used for education post secondary school and does not cover private tutors, therapies or private education needed before the age of 18.

Appoint yourself a Guardian, Health Care Proxy or Power of Attorney

Within the United States, once your child reaches the age of 18 they are legally regarded as an adult in the eyes of the law and will therefore have the same rights as any adult, unless you step in. If you feel that your child’s needs are such that they cannot  make important life decisions regarding finances or health care for themselves, then you need to apply to become your child’s legal guardian.  You can also petition the court to become your child’s legal guardian if you so wish. If you are happier to designate another adult to be the child’s guardian then you can do so. 

In fact, giving another trusted adult legal guardianship of your child will give you peace of mind, knowing that, in the event of your death there will be someone on hand to tend to your child’s needs.

Before you appoint a guardian, speak to the person that you have chosen and make sure that they understand the levels of commitment and care they would need to be responsible for.

If you do not wish to be a legal guardian, nor have power of attorney over your child’s affairs as perhaps your child would be able to make decisions but would perhaps need some guidance, you can appoint yourself or another adult to be a health care proxy instead.

Should your child object to a named guardian or is not in a position to agree to having a legal guardian, then the matter will most likely be decided by a probate court judge.

Write a Will

Again, this goes back to setting up a special needs trust. Make sure that all of your assets and estate goes to the special needs trust as without a will, a probate judge will name your child as the beneficiary and push your child over the threshold for Supplementary Security Income and Medicaid.  If you need help it might be advisable to approach a law professional.

You can also name the guardian you have chosen for your child in your will.

As making a will to include a special needs child is not something that can be done in an off the shelf will writing kit, it would be advisable to hire a lawyer who specializes in people with special needs and who would be familiar with your state’s laws surrounding people with disabilities.

Once you have your will finalized, give a copy to your lawyer and then distribute copies to any guardians you have named within your will.

Name a Trustee

The trustee will be the person who is in charge of the special needs trust once you are gone. This could be a bank, an attorney, a judge, a family member or an individual you trust. 

The trustee will be responsible for making sure that the money from the trust is spent exclusively on your child’s needs and any services, therapies or educational programs that you have specified or that become necessary for the care of your child.  It is important to note that your child’s legal guardian cannot spend any of the money held within the trust with out the permission of the trustee, thus making sure that the money is appropriately spent and will not be wasted on things that may not be appropriate or necessary for your child’s needs.

It is advisable though not to use the same person as you have named as legal guardian as this will ensure that everything is checked and that all finances are handled fairly.

Plan for your child’s independence

At the age of 21, 22 and even 26 in some states, education stops for children with special needs in the United States and you will need to decide what is to happen after this. Do you want your child to still live with you at home?  Is it possible for your child to go into independent or shared living?  If this is the path you want to take, then you need to start looking at homes and house shares.  Investigating different companies and looking at what each benefits package has to offer. Also, it is a good idea to apply to any waiting lists early to avoid disappointment should you find a placement that is perfect for your child.

Compile a Letter of Intent

Although this is not a legally binding document, it is helpful for you to outline your wishes for your child if anything should happen to you. This is your chance to be specific. If your child has a set routine that you would like continued then write it down in detail. If there are special dietary needs, or methods and educational needs that work well for your child, include them in your letter.

Include in your letter and medical support your child has or doctors and medical professionals your child is familiar with and also any medication they take and their schedules and dosages.

Once you have written everything down, make sure that you keep a copy, put a copy with your will and give a copy to any trustees or guardians you have appointed and make sure that the letter stays current by revising and updating it either every year or whenever any new medication is started or a new program is put into place for example.

As this is not a legal document, then it does not need to be seen or held by an attorney and you can change it as often as you want.  It will also cost nothing to compile and doesn’t need to be advised upon my a legal professional.

If you feel you need help, then get some!

There are many firms that offer financial planning for special needs children. To find one, ask the human resources department of the company that give advise you on your benefits package as they may offer this service.  Other areas you can try are the Special NeedsAlliance or the Academy of Special Needs for a referral to a professional special needs financial planner in your area.

A special needs advocate is also someone who will help you through some of the red tape and loop holes, file paperwork and generally support you through applying for help.  To get in touch with an advocate try approaching schools and colleges that offer special needs programs and ask if they can put you in contact with an advocate.

Create a contingency savings plan

It is always a good idea to have some put aside in case an emergency should arise. By saving up as much as you can as often as you can, you are safeguarding against any future financial problems.  It doesn’t matter if you are not in a position to save much each month, as even little amounts will soon mount up.

Other help available

Look into other help that may be available for your child. Look up your local social security office website and see if there are any benefits that you are entitled to that your child does not yet receive.

The United Healthcare Children’s Foundation do offer grants for eligible families. It is always a good idea to check with them to see if there is a grant available for your child. It may be an idea to supplement any medical insurance for special educational or medical therapies your child may need with grant money supplied by the United Healthcare Children’s Foundation.

It is also worth looking into opening an ABLE account for your child. This is not taken into account when assessing the $2,000 threshold for Supplemental Security Income or Medicaid and  is a tax free growth fund to help with housing costs, medical treatment, legal fees or educational costs.  Be aware though that there is a maximum annual contribution limit of $14,000 of tax free savings to this account.

Help can also come in the form of a medical professional such as your family doctor who may be able to help to navigate the mine field of medical costs.  Also, social workers will help you to plan for your child’s future and will lobby on your behalf.

It is also a legal requirement for all schools to offer a free and appropriate educational pathway for children with special needs until they graduate under the Individuals With Disabilities Education Act (IDEA).  In addition to this, the schools must fund private services if it is not able to meet your child’s educational needs.  [email protected] is a program that informs parents of children with special needs of any educational benefits that are available to them through their child’s school.

IDEA also has a program in place for children with special needs starting at the age of 14 and states that the school must provide cross over benefits to help parents of children with special needs to understand the options for their child once they have left high school. To find out more about these benefits, speak to your child’s school’s resource coordinator and discuss with them what you would like to happen once you’r child leaves school.

Another useful resource for finding programs and support is thearc.org. Your local Arc chapter will help you to learn what educational and therapy benefits there might be in your local area to help support your child after they leave school.