Financial Planning For Special Needs

Parents may often question how they will be able to put together enough money to pay for their child's care as they get older, particularly when a child is born with special needs and/or a disability. While every family's circumstance is different, there are sure ongoing threads that can make planning a child's care simpler.

First, it’s vital to be aware that that people with disabilities are frequently eligible for government assistance programs. In any case, the rules for qualification are frequently extremely specific, so it is critical to know when a child is or isn't eligible. Programs like SSI or Medicaid have salary limits – if a child’s pay surpasses those limits, they are no longer qualified for those programs. Qualification for specific programs can likewise rely on upon a parent's wage – moderate-to-high-income earning parents can exclude a child from benefits.

Due to these financial limitations, there are other ways to be certain that that income the child earns is not counted as assets towards the given limit – these methods include setting up a special-needs trust and seeking a financial planner or lawyer who is experienced with estate planning and wills to prevent negative impact of a child’s benefits. A child is eligible for SSI, if the child makes less than $2,000 in assets or earns less than $500 per month. Federal Government pays approximately $450 a month is S.S.I. and subsidies (in certain states) can bring sums closer to $600.

It is advisable to seek a lawyer who is certified in estate planning and will have the expertise to work with disabled individuals. These lawyers will help set up special needs trust and help prepare parental wills, while financial planners can help with ensuring that the funds in the special needs trusts are preserved and available to pay for the costs of the child’s care.

Tips for Financial Planning:

• Do your research and select the best team of financial advisers and lawyers to help you plan your child’s future care. In many cases, it’s recommended a ‘special-needs trust’ be established. These trusts help fund care that is not covered under government benefits. Even though there are options available for setting these up without using an attorney, I strongly discourage it because of the complexity of these arrangements and the negative impact that an improperly settled trust can have on government benefits. For researching help, HIE Help Center provides a good start.

• Plan for your child’s lifetime. The truth is, most of us will not be around to see our children get older; so plan ahead and ensure your child’s care is arranged for after both parents have passed away.

• If a parent or grandparent leave an inheritance for the child, the assets should be funneled through the special needs trust and not gifted directly to the child, in order to protect the child’s benefits.
• Life insurance policies should be established so that funds paid out to the child upon a parent’s death should, again, be funneled through the trust and not directly to the child. There are various life insurance policies dedicated to parents of individuals with disabilities. These include:
  
  
  • Joint-life (first-to-die) policies: These pay out when the first of the two spouses dies, and costs about ⅓ of buying term insurance for both parents.
  • Survivorship-life (second-to-die) policies: These pay out when the second spouse dies, and cost about half of buying term insurance for both spouses.

• Create a letter of intent. This document outlines how the future guardians or caretakers ought to care for the child. This is not a legal document but still provides valuable information such as the child’s medical history, doctors and personal information. 
• Determine Legal Guardianship to help with financial decisions. Legally, a person is an adult when they turn 18, but an individual with special needs may require assistance well into their adult years. Normally, parents are the legal guardians of their children, but it’s highly recommended to appoint in a will who will assume legal guardianship should the parents die.
• Parents who cannot afford a special needs trust can research options. There are arrangements such as a ‘pooled trust’ or ‘master cooperative trust’, where several families pool together assets that are paid out to those families’ children, and the resources are managed by a non-profit organization. The percentage each child receives is established on the initial investment.
  
• Speak to a professional tax accountant when handling your taxes before April 15^th. There are challenging differences on what can be deducted, what expenses can be written off, and other small but very important details (including medical expenses and dependency statuses). HIE Help Center goes into further detail about Form 2441: Child and Dependent Care Services and other information worth looking into.