Now that you’ve started, and hopefully completed, your Letter of Intent, it is time to understand how we are going to address funding the costs of your child’s current and future needs.
There exists a variety of social services, depending upon what state you reside, that can assist with the cost of care for a special needs child. In addition, family members can help contribute to savings accounts or make children the beneficiary of life insurance or estate planning.
Don’t forget, our special needs children can be employed in adulthood, potentially. But first, how much will your child need in adulthood?
Do not let the words scare you, this is more simple than it sounds. It’s the “balance sheet” for your child’s future. Create a list or worksheet of the following monthly expenses that can be expected.
Using these numbers, you’ll be able to determine where gaps may lie in funding needs, especially when compared against life tables.
A financial professional, specifically a Chartered Special Needs Consultant, can help you analyze and estimate how much funding will be needed by trust assets, and help estimate government benefits.
Have you ever seen articles that tell us how much having a child will cost over that child’s lifetime? Click here for more info.
An excerpt states “As of 2015, American parents spend, on average, $233,610 on child costs from birth until the age of 17, not including college.”
This is for a neurotypical child... most experts believe that number is quadrupled for a special needs child, and that’s just to adulthood, not throughout the entire life.
Many experts also believe a special needs child/adult total lifetime costs can reach beyond one million dollars. The data is not easily accessed due to the multiple varieties of needs.
One thing is certain. . . it is a SIGNIFICANT amount of money that a majority of Americans just do not have the ability to save and pay on their own.
Most government benefits are needs based (meaning limited assets/income). These programs include Supplemental Security Income, Medicaid, Medicaid waiver, Food Stamps, and Section 8 housing.
Other benefits include Social Security Disability Insurance (based on parents work history if the child is diagnosed before age 22), and Medicare. For Medicare, a waiting period exists after eligibility of SSDI is established, and usually, a higher monthly benefit is achieved when the child is established disabled by the Social Security Administration before age 22.
Children with qualifying disabilities whose families meet income and asset requirements are eligible to receive monthly cash payments intended to help families meet their child’s needs.
The resources and income of the child’s parents are counted or “deemed”, with the exception of the primary residence and one automobile. Some social insurance programs are available, however, regardless of income or assets, but vary according to state.
Here are useful links to social security benefits for Supplemental, Disability, as well as Medicaid. Disabled children of parents that qualify for social security or social security disability are eligible to receive benefits based upon their parents work history. I advise looking into your state’s programs, as well, if looking for funding opportunities.
A diagnosis of Autism, intellectual disability, Down’s Syndrome, or any other disability does not automatically preclude all special needs children from a future of learning and fulfilling their personal goals and dreams.
As parents of differently-abled individuals, we are gifted with the opportunity to help our children find pleasure and fulfillment in ways typical children may not. Much admiration must be given to those that came before us to push our social services to allow our kids to earn their own money while still benefiting from government programs.
However, there are limits, depending on which state you reside. Below is a link with a multitude of information regarding the Ticket to Work program, which is directed by the Social Security Administration.
Have you heard of 529 Plans? Just in case, these are tax-incentive savings plans intended to save funds for college. But what if your child is not going to college? What about the other costs that accompany our kiddos? What do we do for their future? It is called an ABLE account.
It is to be noted that any funds above $100,000 in an ABLE account are counted as assets owned by the disabled for social security purposes (Medicaid eligibility is not affected). Also, any funds within an ABLE account used for “eats or sheets”, meaning living or feeding, will count as income and can affect eligibility for government benefits. Lastly, upon the death of the beneficiary of the ABLE account, any funds remaining will “payback” Medicaid before being distributed amongst survivors.
ABLE Accounts, which are tax-advantaged savings accounts for individuals with disabilities and their families, were created as a result of the passage of the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act. The beneficiary of the account is the account owner, and income earned by the accounts will not be taxed. Contributions to the account, which can be made by any person (the account beneficiary, family and friends), must be made using post-taxed dollars and will not be tax deductible for purposes of federal taxes, however, some states may allow for state income tax deductions for contributions made to an ABLE account.”
Special Needs Trust (3rd party and self-funded)
We can get government benefits, they can potentially earn income, and we can save for our children’s future with ABLE accounts, but...
“Is it enough for the entire lifetime of our child?”
Government programs are ever-evolving, take time and effort, and are not 100% dependable.
“What happens when we as parents/guardians/primary caregivers are gone?”
Our Letter of Intent, while exceptionally important, is NOT a legally binding document.
“What happens if one of our well-meaning relatives or friends names our child as a beneficiary?”
Money left directly to our children are considered a self-owned asset and will count against potential social service programs.
“We do not have the ability to save a lot of money for our child, what can we do to secure his/her financial future should something happen to us or should our child outlive us?”
Most of us are in this zone, and it can be frightful, but there are options.
For a good many middle-class Americans, the “needs-based” programs are just beyond our income thresholds, but the costs of helping our children thrive are astronomical, even with health insurance. We are the “working poor”. Dependent on the state, we may be able to qualify for some services when our kids are young, but how do we provide for the future?
The answer is life insurance. Take a second and think about your largest asset, especially if you are age 26-55.
It is not your 401(k).
It is not your house.
It is your ability to earn income for the next 10-30 years, depending upon age. If you died tomorrow, what would your family do? As a special needs family, it is so much more than paying the mortgage off and leaving a little for your spouse and kids, it is about making sure your child gets everything you know they deserve, but you have to make sure it is used appropriately and in a way that protects the child’s government benefit opportunities.
That is where the Supplemental Special Needs Trust comes into play.
If your child is a potential recipient of an inheritance or has already been gifted a significant amount of funds, it is crucial to work with an attorney to draft a Self-funded Special Needs Trust, also referred to as a Payback Trust. This type of trust allows the trustee to use funds to pay for supplemental needs (not food or shelter) like vacations, special therapies like equestrian and aquatics, entertainment, etc.
The Trust is its own entity, the “owner” of the assets for the benefit of the special needs person. Upon the death of the beneficiary, any assets left in the name of the trust must pay back Medicaid first. Any assets left after that can be distributed according to the Trust directions.
But what’s that I said about life insurance?
If you are not in the financial situation to warrant the self-funded trust, your family should look into creating a “Third Party Supplemental Special Needs Trust”. This type of trust—also drawn up with the help of an estate planning attorney with experience working with special needs families—is funded with life insurance proceeds. The Trust is named as the beneficiary of a policy/policies and outlines what the funds are to be used for, how they can be invested, and who has access. Many families that do not have significant assets or income use this tool to secure the financial future for their special needs child.
Hopefully, this article has granted you greater insight, resources, and tools you can use to start putting together a strategy to protect the future of your child.
Please take advantage of this information! Time is our #1 thief. We all get lost in our day-to-day until one day we realize what we should’ve done. It is never too early or too late to start planning!
Jacqueline Beirne hails from Florence, Alabama and is a proud graduate of the University of Alabama (MBA, 2002). She is a licensed financial advisor since 2002, holding a Series 7, Series 66, and Life & Health License. She is a candidate to receive the Chartered Special Needs Consultant designation (ChSNC) in March 2019 from the American College of Financial Planning. Jacqueline lives the life of special needs all day every day. Her career as a financial advisor specializes in working with families of differently-abled children. Since the day her son was diagnosed as intellectually disabled, she has made it her life mission to help families like hers navigate the education system, social services, therapy providers and long term financial planning. She is co-founder/co-president of the Hamden Special Education PTA, working alongside other strong-willed mothers to advocate for the Education rights of our special kiddos and assist our Special Education teachers with classroom needs. Jacqueline also volunteers with various Youth/Young Children organizations in her community.
Jacqueline lives in Hamden, CT with her husband, two step-daughters, and her baby boy. And the dog... don’t forget the dog!
Jacqueline can be contacted at firstname.lastname@example.org
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