Financial Planning for Parents of Children with Disabilities

Parents of children with disabilities know that each day brings small and large victories. Parenting children with disabilities also comes with unique challenges, including increased financial responsibilities and more complex planning requirements for the future. The cost of therapies, medical procedures, equipment and caregiving — on top of wages lost as a result of caretaking duties — can be daunting. Because these children may continue to require care into adulthood, sound financial and estate planning is essential to ensure they're cared for even after you're gone.

Try not to get overwhelmed at the thought of financial planning for a child with a disability. This guide is focused on helping you plan one step at a time, learn what help is available and talk to other parents in your situation. A sound strategy can help you take concrete steps to manage your finances and gain peace of mind for your child's financial future.

Planning for an uncertain and expensive future can be daunting. Parents of children with disabilities often worry about who will care for their children and how their children will manage when they’re gone.

“Once you become a parent, you worry about everything,” says Valerie Zaloom Buccino, Esq., an attorney specializing in estate planning, planning and guardianship for individuals with disabilities. “This worry never ends, but for parents with children with a disability, this worry takes on a much different meaning.”

Though all parents need to plan for their children’s future, parents of kids with disabilities have to take more steps than others. Breaking down the tasks and tackling them over time can help you feel less perplexed.

Parents who are living through similar circumstances can provide emotional support and a wealth of information. Finding your community where families can search for advice, referrals and moral support is vital.

“Parents in a similar situation are going to be the most capable of directing people,” Dania Ermentrout, a case manager in North Carolina’s Medicaid program and parent of a medically fragile daughter, said.

They may have already solved the exact problem you’re facing. Eramentrout also recommends finding or starting a Facebook group to connect with other parents of kids with similar diagnoses. “That’s where I get most of my survival tips,” she said.

Christine Lai, founder of the Special Education Legal Fund and a parent of a child with autism, also recommends finding community online.

“The Internet is obviously a great thing,” Lai said. “But for families with children with disabilities, it is a tremendous resource that people outside of the community might not understand. For a family that doesn't know anyone, no one in their circle has had this experience, or maybe they live in a remote area, this is a real lifesaver.

Most people need to adjust to the level of expenses required to care for children with disabilities. The first step in an effective plan is a realistic assessment of your current situation. Start asking and seeking answers for questions such as:

• Do you have assets to pay for your child’s expenses?
• Do you have debts you need to manage?
• Can you scale back on other spending to make room for new costs?

These questions may not have easy answers, but putting some thought into them will help you build your plan on a solid foundation.

Explore these vital programs and resources for kids with disabilities, even if you think you don’t qualify.

Medicaid

Medicare

Social Security Disability Benefits

Applying and qualifying for SSI or SSDI requires an extensive process, and your child must meet clinical criteria. For example, children diagnosed with Down syndrome automatically qualify for SSI if they meet the financial requirements.

Navigating education, insurance, finances and the legalities of raising a child with a disability is complex. It's a good idea to consult expert financial advisors, attorneys who specialize in helping families with children with disabilities and special education advocates. Ensure they have expertise in disability issues and relevant programs such as Medicaid, Medicare and Social Security.

Set short- and long-term goals for your financial plan and then expect to adapt.

When parents of a 5-year-old with a disability asked Buccino how to plan for their child outliving them, she answered, "We have to take this a step at a time. An estate plan will have to change as your child gets older."

She tells clients to plan for today, but be ready to adjust and amend the plan as things change.

"Kids with disabilities often achieve more than we dare to hope for," Buccino says. "I've seen it time and time again. So we prepare for the worst, and once everything is in place, I ask them to put it aside, and allow yourself to hope for the best."

For many parents with children with disabilities, it helps to consider short- and long-term needs when making plans for their children.

Short-Term Strategies

Long-Term Strategies

Gather personal information for you and your child, including:

• Birth certificates, Social Security numbers and insurance policy information.
• Usernames and passwords for online services including banks, patient portals, investment accounts and social media accounts.
• Emergency contacts.
• Medical information such as names and locations of doctors and hospitals, diagnoses, medications, equipment and allergies.
• Financial information including investments, asset information, financial advisor information, information on your income and expenses like mortgages or other debts.
• Legal documents such as a power of attorney and will.

These details can help in a crisis when the last thing you want to worry about is finding your passwords or making sure family members can access your key information.

Build your repository of information one step at a time, so it doesn't overwhelm you. Just imagine how much better off you'll be to have your information together if you need help.

Raising a child with a disability can be extremely expensive, but there are ways to mitigate these costs. Financial instruments exist specifically to help families raising children with disabilities.

ABLE accounts are investment and savings accounts created by the Achieving a Better Life Experience Act enacted in 2014. They have specific tax advantages.

Trusts are a legal way to transfer assets to a third party (the trustee) to benefit another (the beneficiary). Trusts are created by a "grantor," who typically works with a lawyer to establish the trust, name the beneficiary or beneficiaries, identify the trustee and transfer assets into the trust. The grantor can designate themselves as a trustee and name successor trustees if they become incapacitated or die.

Among the benefits of a trust are the efficient distribution of assets to heirs without court involvement, the ability to specify how you want the assets to be used, avoiding certain taxes and protecting assets from creditors or lawsuits.

A special needs or supplemental trust (SNT) is a trust set up to benefit an individual with disabilities to supplement public benefits without disqualifying them from those benefits.

• Funds from an SNT can be used for expenses that Medicaid or SSI does not, like education or vacation expenses, but not food or housing, which SSI would cover.
• "We strongly recommend a corporate trustee because they are immortal," explained Christopher Waddell, Certified Financial Planner and Managing Director of the Waddell Group.

Corporate trustees provide continuity, professionalism, and protection against the possibility that relatives fail to guard the beneficiary's interests.

Some trusts are counted as assets of the trust beneficiary and could reduce the individual's Supplemental Security Income (SSI) benefits. To avoid unintentionally disqualifying your child from government assistance, be careful when using the funds. If your child receives cash from the trust, their SSI benefits can be reduced dollar for dollar. Using the trust to pay for food, housing and housing-related expenses like taxes or utilities, can also reduce benefits.

SNTs can pay for other items, but check the details with a planner or attorney who specializes in working with individuals who have a disability.

Life insurance is essential if anyone else relies on your income. When you die, life insurance pays out a death benefit meant to replace your income, cover your debts and pay for your funeral expenses.

Parents can protect their children who have disabilities with life insurance, which can cover the child’s expenses after the parents are gone.

Some families may also consider buying a life insurance policy for the child with a disability. Though it may be unpleasant to contemplate, if you outlive your child, the life insurance policy can replace your lost wages and retirement benefits.

Whole life insurance typically covers the insured individual indefinitely — as long as they pay the premium — and guarantees a death benefit payout. Whole life insurance value accumulates over the life of the policy and can be expensive.

Term life insurance is guaranteed for a set period. If the insured person dies during that term, the insurer pays out the death benefit. There is no cash value to a term life insurance policy, so it is usually less expensive.

Guardianship, also known as conservatorship, is the legal process of appointing a guardian to make decisions for another person.

Typically, parents make these decisions, but when children turn 18, parents no longer have decision-making authority on their behalf. Children with disabilities may not be able to make decisions for themselves and may still need someone to support them.

To be appointed legal guardians, parents (or other responsible adults) need to petition the court. One parent or both could be designated guardian or co-guardians. If parents cannot agree on who should be the guardian, the court may appoint someone else.

Even if one or both parents serve as guardians, they should designate in their will who would take over for them if they die. Guardians should appoint successor guardians in the event that the chosen guardian dies or is unable to serve in that role.

When children with disabilities become adults, they may still need costly services. To ensure your adult child is financially secure, consider and incorporate these costs into your long-term financial plan.

Cost

Cost

Cost

Cost

Cost

Cost

• Medicare Part A monthly premiums: $0–$458 per month
• Medicare Part B monthly premiums: $144 per month
• Marketplace plans: $331–$501 per month

Cost

• Medicare Part A: $1,408 deductible, $352–$704 coinsurance for 61 or more days in the hospital
• Medicare Part B: $198 deductible, 20% of Medicare-approved fees for outpatient care and durable medical equipment
• Marketplace plans: $28–$6,506 deductible, $1,187–$7,735 average out-of-pocket maximum

Cost

As you develop a plan to secure a financial future for your child, you may find yourself in need of additional help with managing your money. MoneyGeek compiled a valuable resource list to help parents of children with disabilities, ranging from training opportunities, support groups and financial assistance programs.

• Academy of Special Needs Planners: This organization of professionals serves and advises people and families with disabilities. It includes information on legal developments and a forum for exchanging best practices and providing information for consumers with disabilities.
• The Arc Center for Future Planning: This guide is for people with intellectual or developmental disabilities to enable them to live as independently as possible after their parent or caregiver is no longer able to care for them.
• The ARC of the United States: ARC's advocacy efforts are aimed to promote a future of inclusive play, work, worship, community, travel and more for individuals who have intellectual or other disabling conditions. Their website offers information about current activities, links to ARC chapters in all states, and ways to become involved.
• Center for Parent Information and Resources: This site provides information about critical topics in special education and links to each state's parent training and information center, which are federally funded programs to help parents navigate this complex system.
• Council of Parent Attorneys and Advocates (COPAA): Composed of families, special education attorneys and advocates across the country, COPAA takes cases that will advance education law for families, provides training for parents to advocate in their processes or to become special education advocates themselves and supports the rights of families with kids in special education.
• Courageous Parents Network: This network empowers families and providers caring for children with serious illnesses by providing videos, podcasts and printed guides.
• Family Voices: This family-led organization promotes partnerships at all levels of health care and aims to improve health care services and policies at all levels.
• Federation for Children with Special Needs: FCSN provides support and help to parents of children with disabilities, their professional partners and their communities.
• Kids' Waivers: This site provides information on state Medicaid waivers and other programs for children with disabilities or medical needs. It includes program details and state-specific details.
• National Resource Center for Supported Decision-Making: This center offers resources, guides and toolkits to help families understand options available in the areas of health care, education and guardianship.
• Organization for Autism Research: This organization provides resources for advocates, families and educators, including information, scholarships for students with autism and research grants.
• Parent to Parent USA (P2P): P2P oversees a network of parent-to-parent programs across the country that offer emotional support to parents from trained volunteer support parents.
• Special Education Legal Fund (S.E.L.F.): Created to help families effectively advocate for their child in the special education system, this funding source provides up to $5,000 in grants to cover qualifying special education legal fees for families in Connecticut and education for agencies supporting families with children with disabilities.
• Special Needs Alliance: Long-term financial planning is complex for families, particularly around issues related to a loved one's disability. This site offers information about government programs, ABLE accounts, special needs or supplemental trusts, condition-specific organizations and related information.
• Understood.org: This organization provides a wealth of resources for parents, including template letters to request an individualized education program (IEP) and guidelines for approaching getting support for kids with learning and thinking differences.
• Financial Planning for Parents of Children With Learning Disabilities: MoneyGeek's guide developed to help parents of children with learning disabilities manage costs for diagnostic testing, therapy and interventions, while offering resources on financial aid, tax credits and long-term financial planning.