Special needs children and creating a financial game plan

Heath Burch, CFP


The addition of a child with special needs to your family can bring a range of emotions. With time the emotions can settle, but the responsibility of providing for your growing family often takes hold. Creating a financial plan with a trusted advisor is critical, and arriving at various milestones can guide you in what to do next. Below are seven milestones to benchmark your planning efforts with financial advice for every turning point.

At diagnosis

The first thing to remember at diagnosis is to calm your thoughts and avoid making any sudden financial decisions or significant changes. The changes to your family will likely result in the need for financial adjustment, but they don’t have to happen all at once.

Start by working to educate yourself on your child’s diagnosis, building a base of knowledge to later plan for his/her long-term needs. A great way to do this is to find a support system, whether that be a parent support group, diagnosis specific organizations or other community groups.

If there is one financial adjustment that can be made right away, beginning to build cash reserves is an admirable goal, especially if you don’t already have a healthy emergency fund. For most families this is not something that can be done all at once, but recognize that unplanned expenses may come up for the care and support of your child. Having cash available to handle these unplanned expenses may save you from having to make difficult financial decisions later as a result of taking on debt or forced account reallocations.

Consider the Long-Term

Deciding to address what happens to your child if something happens to you is not easy for many parents, so finding the momentum to draft a will and trust can be challenging. That’s why this guidance isn’t tied to a benchmark, and is instead something we would encourage a family to address as soon as they are emotionally ready.

Once you are prepared to discuss this, engage a qualified attorney that focuses their practice on special needs planning. Work through the drafting of a will to name guardians for your minor children, and talk through a family trust to handle the distribution of your assets. And if you expect that your child may qualify for SSI or other supports, consider a special needs trust to help preserve eligibility. Once the trust work is in order your job is not complete until you have adjusted all of the beneficiary designations to reflect this work.

As your child reaches school-age

This time can provide a moment of financial pause for parents, where the focus might be on early intervention for your child and the preparation to start school. But that financial pause quickly dissipates if you are fortunate enough to have options when considering your child’s needs. The expense associated with private school options raises a number of financial questions. Can you afford these options, do the catered services to your child’s diagnosis justify the expense, and what are the long-term financial impacts of these decisions? The entire family must be considered when thinking through the impact on retirement, future education funding and the ability to leave assets to a special needs trust.

As you work through your Individualized Education Program with the district, consider what holes might be left to fill through private services. The IEP will develop the core routine and support structure for your child, but what else might you need to integrate outside of the school day and how do those services fit in the family budget?

Your Child Turns 18

A big transition for parents and child alike occurs when your child turns 18 and becomes an adult. Maybe the most pressing task is gaining an understanding of what social security is and what it can provide, both now and in the future. While some of the benefit of social security may not become clear until later on if your child qualifies, one definable perk is the monthly cash benefit that is scheduled to increase to $721 per month in 2014.

This cash benefit can help support the household and provide for your child’s needs, but also comes with requirements. You need to know how to report the receipt and use of the funds, consider charging your child rent in order to preserve the full monthly benefit amount and also manage the accumulation of the money so it does not exceed asset restrictions.

After High School

It’s during this time you have to work to avoid falling in the “black hole” that can form when you leave the daily structure of the school system. Are there post-secondary education options to consider, and if so how do you implement the funding strategy that should have been created years prior? If some form of school or career development isn’t appropriate, are there employment options available to your child? These options can come in the form of full or part-time employment, or possibly through work programs designed to increase independence, all with a varying impact on your child’s (and thus your) finances.

It’s at this time that you should begin to gain some clarity as to what your child’s financial needs will be going forward, so as a family you can begin to really plan for how you will supplement what your child has available through social security and possibly employment. For the first time you can begin to see how much your child will need in their trust.

The financial planning becomes ever more important during these years, because while many are enjoying their peak earning years and saving more for retirement than before, the newfound clarity of what might need to be left in trust for your child can be unnerving. Saving for our own retirement can be challenge enough for many, so adding the funding for a special needs trust to the equation requires a heightened level of focus and specialized guidance.

Entering Adulthood

As you approach a time of peak independence for your child, residential options can now become a consideration. Finding the appropriate option with your child takes dedication and time, and the funding for these options can take the same. Is the best solution for your family funded via social security, does it require private payment or is it a combination of the two?

Later in Life

It’s time to be certain that your estate is in order. After outlining all of the potential costs earlier, understand that these expenses don’t end when you are no longer here to provide for them. Your money doesn’t just have to last as long as you do, but for as long as your child needs it. Make certain you have sought out the counsel of an advisor experienced in helping you achieve this. Financial projections could run for decades longer than your life span to properly secure your child’s future.

Also spend the necessary time making sure you have enabled future caregivers and trustees to do what you have asked of them. Have you accounted for all of your assets in a centralized location, complete with the financial projections that were the foundation of your decisions? Are all necessary records organized? The time to integrate the people that will be your child’s future support system is now.

Regardless of which milestone you are at, know that you are not alone. Don’t hesitate to research resources and engage a trusted advisor to help you navigate the opportunities and challenges together. Careful planning is key, and understanding milestones can help ensure a smoother transition from milestone to milestone and peace of mind.

Courtesy of Parenting Special Needs Magazine


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