By estimating immediate and long-term financial needs, it's possible to create a financial plan that secures your child's future.
When parents discover their child has a special need, money isn't always the first issue that comes to mind. Tending to a child's immediate emotional, physical, and educational needs is an almost all-consuming task, so it's unsurprising that financial planning often takes a backseat.
However, financial planning is equally crucial to secure your child's long-term well-being and independence, especially when you can no longer provide support.
Needs Assessment
Accurately estimating your child's short- and long-term financial needs is vital to creating a financial plan. By carefully assessing the various expenses associated with your child's care, both now and in the future, you can ensure that your financial strategies are well-aligned with their unique needs and goals. Factors to consider include:
Immediate Needs
The first step in the needs assessment process is to understand the expenses associated with your child's daily care. These costs may include:
- Therapy services and specialized care
- Prescriptions, equipment, and supplies
- Housing modifications for accessibility
- Personal care assistance and respite care
- Transportation to appointments and other activities
Long-Term Needs
In addition to assessing your child's immediate needs, it's crucial to take a long-term view and consider their potential needs and goals for the future. This step involves creating multiple scenarios based on varying levels of care and self-sufficiency and factoring in projected costs for:
- Ongoing medical care and therapies
- Housing and supported living arrangements
- Higher education or vocational training
- Financial support if unable to work full-time
The needs assessment process is ongoing, as your child's needs and circumstances may change. Regularly reviewing and updating your assessment can help ensure that your financial plan remains responsive to your child's evolving requirements.
Meeting the Need
Once you know the potential costs, you can start on a plan to meet your child's financial needs now and into the future.
Leveraging Government Benefits
Government programs like Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) can provide vital financial support but have strict eligibility criteria.
SSI is a needs-based program that provides cash assistance to low-income individuals with disabilities. At the same time, SSDI is an earned benefit based on the individual's or their parent's employment history. Eligibility criteria and payment amounts vary between the two programs. They may be influenced by factors such as the child's age, disability onset, and the parent's work record.
Payment formulations and eligibility requirements are complex and often vary by state, so asking a financial professional for assistance is a good idea. Non-profit organizations or professional advocates for disabled or special needs children are another vital resource for parents when maximizing financial assistance.
Special Needs Trusts and ABLE Accounts
It's crucial to understand personal assets' impact on their eligibility for government benefits. To maintain eligibility for programs like SSI and Medicaid, your child can typically have no more than $2,000 in personal assets. This low asset ceiling can make saving for your child's long-term needs challenging without jeopardizing their access to vital support. Special needs trusts and ABLE accounts help to overcome this limitation.
A special needs trust is a legal arrangement that allows you to hold assets for your child's benefit without affecting their eligibility for government benefits. Assets held in a special needs trust can be used to pay for a wide range of expenses that enhance your child's quality of life - personal care services, assistive technology, educational activities, home modifications for accessibility, plus more.
One key benefit of a special needs trust is its flexibility. The trust can be customized to meet your child's unique needs and structured to provide ongoing support throughout their lifetime. Additionally, by appointing a trustee to manage the assets, you can ensure that the funds are used appropriately and in your child's best interests.
ABLE (Achieving a Better Life Experience) accounts are tax-advantaged savings accounts that allow individuals with disabilities to save money without affecting their eligibility for government benefits. Account contributions can be made by anyone, including the beneficiary, family members, friends, or other supporters. As long as the account balance remains below $100,000, it is not counted as a resource for SSI purposes. Amounts up to the account limit don't affect eligibility for other programs such as Social Security and Disability Insurance, Medicaid, HUD housing assistance, plus more.
Creating a Living Financial Plan
Mapping a financial plan years, or even decades, in advance is a tall order. So a living financial plan is a document that evolves to meet your child's changing needs and the availability of financial support. Essential components include:
- Comprehensive Assessment - Using your child's immediate and long-term needs estimates, evaluate your current financial resources, potential asset growth, and expected contributions from Social Security benefits or other governmental programs.
- Continuous Review - Your child's needs can change as they grow and circumstances evolve. Regularly updating your financial plan - at least annually or after significant life events (such as changes in health, legislation, or family income) - ensures that it remains aligned with your child's current needs and aspirations. These reviews involve adjusting for changes in treatment costs, educational needs, or living arrangements.
- Contingency Planning - What if a primary income earner in the family cannot work or if unexpected medical expenses arise? So, it's vital to plan for contingencies. These steps may include maintaining an emergency fund, adjusting insurance coverage, or revising investment strategies to ensure liquidity and access to funds when needed.
When planning for your child, remember your retirement needs and the financial well-being of other family members, such as siblings. Keeping family members informed about the plan ensures that everyone who might play a role in your child's future understands the strategy and their roles within it.
Working with Financial Professionals
Collaborating with financial advisors specializing in special needs planning can provide invaluable guidance. These professionals can offer insights into tax benefits, estate planning, insurance needs, and investment strategies tailored to your family's unique circumstances. They can help you assess your child's immediate and long-term needs, identify potential gaps in your current financial plan, and recommend strategies to address them.
In addition to offering customized advice, they can help navigate complex benefit programs and ensure that your financial actions do not inadvertently disqualify your child from essential services. Professionals also monitor changes in legislation, government benefits, and other factors that may impact your child's financial future and ensure that you maximize available resources.
When selecting a financial professional to work with, choosing someone with specific experience and expertise in special needs planning is essential. Look for advisors with designations like the Chartered Special Needs Consultant (ChSNC) or the Certified Financial Planner (CFP) focusing on special needs planning. These professionals have completed advanced training and have demonstrated a commitment to serving the unique needs of families with special needs children.
To find the right financial professional for your family, consider contacting organizations like the Special Needs Alliance or the National Association of Personal Financial Advisors (NAPFA) for referrals. You can also ask for recommendations from other families in the special needs community, your child's healthcare providers, or educational specialists.
When meeting with potential financial advisors, come prepared with questions about their experience, approach to special needs planning, and familiarity with your family's specific challenges and opportunities. Look for professionals who listen actively, communicate clearly, and demonstrate a genuine commitment to understanding and supporting your child's needs.
The Takeaway
Financial planning for a child with special needs is a lifelong journey that requires dedication, flexibility, and a proactive approach. One crucial aspect to emphasize is the importance of starting early. The sooner you begin assessing your child's needs and exploring financial strategies, the more time you have to make informed decisions, build savings, and make necessary adjustments. Early planning allows you to take full advantage of compound growth, maximizing the impact of your investments over time.
Remember, as a parent of a child with special needs, you are their greatest advocate and source of support. By taking a proactive approach to financial planning, you can work toward a secure and independent financial future for your child.