Essential Guide to Special Needs Financial Planning

Creating a solid plan for special needs financial planning is more than just saving for the future. It means making sure your loved one with disabilities is cared for, both while you’re here and after you’re gone. It also means thinking about government benefits and making the most of your resources. This kind of planning is essential for anyone with a family member who has special needs, especially since the Census Bureau reported in 2019 that 4.3% of children under 18 have a disability.

Table Of Contents:

• Facing the Challenge of Special Needs Financial Planning
  • Why Special Needs Financial Planning Is Important
  • Steps To Create a Secure Future With Special Needs Financial Planning
    • 1. Start Early: The Power of Time
    • 2. Get Expert Advice: Finding the Right Team
    • 3. Special Needs Trust
    • 4. ABLE Account: Enhancing Independence
• FAQs about special needs financial planning
  • How to financially plan for my child with disabilities?
  • What is the best savings account for my child with disabilities?
  • What is the best state to live in with my child with disabilities?
  • How can I have enough funds to not only meet my loved one’s needs but also help them gain as much independence as possible?
• Conclusion

Facing the Challenge of Special Needs Financial Planning

Many parents and caregivers are so focused on taking care of their loved ones that their own financial future takes a back seat. Studies by the American College of Financial Services show that 90% of families dealing with special needs put their loved one’s care ahead of their own retirement planning.

This is understandable, as caring for a family member with disabilities requires incredible dedication. However, neglecting your financial well-being can cause trouble later. Families can face unexpected legal fees, disability expenses, and future planning concerns if they do not plan accordingly.

Why Special Needs Financial Planning Is Important

Solid special needs financial planning helps families prepare for the future and feel secure about what happens when they’re no longer able to provide care. Special needs financial planning requires families to think about life insurance, healthcare, and social security benefits.

Here’s a closer look at its importance:

• Government Benefits: Navigating government programs such as Medicaid and Supplemental Security Income (SSI) is crucial. These programs provide a safety net for individuals with disabilities but have complex eligibility rules. Special needs financial planning helps structure finances to maintain eligibility and maximize these benefits.
• Long-Term Care: Caring for an individual with special needs often involves long-term care costs that can strain even well-off families. A comprehensive financial plan helps allocate resources strategically, explore funding options, and secure their future financial stability.
• Protecting Your Loved One’s Future: Imagine what might happen if you were suddenly not around to care for your loved one. Would they have the resources for their everyday needs? Thorough planning ensures they’re always taken care of, no matter what.

Steps To Create a Secure Future With Special Needs Financial Planning

Jumping into the world of special needs financial planning may feel daunting, but taking things step by step will get you there. Each step is crucial to consider when you are planning for families with special needs.

1. Start Early: The Power of Time

Even if your child is young, beginning early lets you take full advantage of compound interest and tax-advantaged savings. Starting early also allows you to research and fully grasp available resources and government programs.

2. Get Expert Advice: Finding the Right Team

You’re not alone in this journey. Seek advice from experienced professionals specializing in special needs planning.

This might include:

• A Certified Financial Planner knowledgeable in special needs trusts and government benefits. You can use online directories from organizations like the Special Needs Alliance.
• An attorney specializing in estate planning, particularly those familiar with special needs trusts.
• A benefits specialist or advocate to help navigate government programs and ensure your loved one is receiving all eligible benefits.

3. Special Needs Trust

One cornerstone of effective special needs financial planning is setting up a special needs trust (SNT). An SNT is a legal arrangement designed to provide for someone with disabilities without impacting their eligibility for government benefits like SSI or Medicaid. Your financial advisor may recommend this to you.

Type of Special Needs Trust	Description
(d)(4)(A) or First-Party Trust	Funded with assets belonging to the individual with disabilities, typically from inheritance or a personal injury settlement.
(d)(4)(C) or Third-Party Trust	Funded with assets from someone other than the individual with disabilities, commonly parents or other family members.

To get started, talk with an experienced estate planning attorney specializing in special needs to explore if a special needs trust fits your situation.

4. ABLE Account: Enhancing Independence

Created in 2014, ABLE accounts , offer tax advantages for those with disabilities before the age of 26. Think of them like 529 plans for education, but instead, they cover expenses like healthcare, housing, transportation, and more.

As of this writing (2024) you can contribute up to $18,000 per year to an ABLE account, and the money grows tax-free. While it doesn’t affect SSI eligibility up to $100,000, balances above that amount can impact eligibility for SSI. If your loved one is employed and receiving SSI, they can contribute additional funds based on their income. This fosters financial independence and helps cover costs beyond what government benefits might cover.

FAQs about special needs financial planning

How to financially plan for my child with disabilities?

Planning for a child with special needs starts with creating a comprehensive strategy. This includes assembling a team of financial advisors, lawyers specializing in special needs, and other relevant professionals.

It also means making the most of government programs and setting up tools like Special Needs Trusts (SNTs) or ABLE accounts. Remember, starting young gives your plan more time to grow, maximizing resources for your child’s future.

What is the best savings account for my child with disabilities?

While standard savings accounts have their place, consider these options for your child with disabilities:

• ABLE Account: This tax-advantaged account, available for disabilities diagnosed before age 26, covers various expenses, enhancing independence.
• 529 ABLE Account: These accounts provide tax-free growth for qualifying educational expenses and, under certain conditions, rollovers to ABLE accounts for disability-related costs.
• Special Needs Trust (SNT): SNTs are flexible legal tools managed by a trustee to benefit someone with disabilities without affecting government benefits.

What is the best state to live in with my child with disabilities?

Choosing the “best” state depends on each family’s circumstances and the individual’s needs. Public benefits and income tax vary from state to state.

Some factors to weigh are:

• State-provided services and support: States vary significantly in their offerings for individuals with disabilities.
• Cost of living and housing affordability: Factor in housing costs and overall affordability since living expenses can be significant.
• Employment opportunities: Consider whether there are opportunities for supported employment or vocational training to encourage independence.

It’s crucial to research and compare states based on your personal situation. Look at factors like available programs, financial assistance, and the overall support system each offers. Connect with disability advocacy groups for real-time insights specific to your requirements.

How can I have enough funds to not only meet my loved one’s needs but also help them gain as much independence as possible?

Caring for a loved one with a disability can be financially overwhelming. We want the best for our loved ones, but there also might be times when we don’t have sufficient resources to meet their needs. Here are a few general ideas. Please feel free to reach out to us for a consultation. We want to help you identify the resources specific to your situation. Here are a few ideas.

1. 1. SSI/SSDI. If they are denied and you feel your loved one meets the eligibility requirements, appeal the decision.
2. 2. Medicaid healthcare and State Medicaid Waivers. Many states have waitlists. Get on the waitlist sooner rather than later.
3. 3. ABLE Accounts
4. 4. Funding a Third-Party Supplemental Needs Trust (Special Needs Trust). Families without a lot of resources and assets find this to be overwhelming and unattainable. We’d like to help you find a way to make funding your trust a reality.
5. 5. Utilize your state’s waiver system and vocational rehabilitation to access training and employment. If a loved one knows how to make toast – that is an employable skill. We’d like to help you find and access services in your area.
6. 6. If your loved one is still getting ready for employment (age or developmentally), let us help you find resources for their current stage of life. Example: volunteer positions, education programs, training to develop hard and soft employment skills.
7. 7. GRANTS!!! Reach out to us! We’d like to help you connect with grant funding for specific therapy, technology, programs, etc. We have resources!
8. 8. Utilize personal, natural, and professional support to subsidize your bandwidth and capacity. We would like to help you with person-centered planning. We’ll help you map the future and identify supports to make the vision a reality.

Conclusion

Special needs financial planning requires careful consideration and a personalized approach. However, equipping yourself with knowledge, building a supportive team of professionals, and exploring different strategies lets you face these challenges with confidence, ensuring a secure future for your loved one and yourself. With a bit of planning and expert guidance, you can create a stable and supportive environment where everyone thrives.