Help parents of special-needs children plan for their financial future

By Mary Anne Ehlert

Imagine having to scrape together enough money to put your child through Harvard University, every year for the rest of his or her life. That’s the daunting task faced by the parents of a child with special needs.

Special-needs parents must be ready to fund $50,000 or more a year for their child’s future care, even after the parents have retired or died. Parents of a child with special needs are haunted by one question: “Who will take care of my child when I’m gone?”

More families find themselves in this situation because the number of children diagnosed with developmental disabilities is increasing. Recent estimates from the U.S. Centers for Disease Control and Prevention show that about one in six, or about 17%, of children aged 3 through 17 years have a one or more developmental disabilities that impair physical health, learning or language behavior.

It's a matter of debate whether there are more children with disabilities, or whether there are more diagnoses. For example, because of earlier detection, the number of children with autism spectrum disorder is increasing, particularly among boys. Where people used to say, “boys will be boys,” now those boys are screened for ASD.

Many parents of children with disabilities spend most of their time and resources taking care of the here and now, but don’t know where to turn for their unique financial planning requirements.

For such parents, the task of planning for their child’s future may seem overwhelming. How does one qualify for government benefits? Evaluate the right school systems? Find the right residential program? Create an appropriate financial plan? Structure an estate plan?

That’s why the field of financial planning for special-needs families is growing. It’s specialized because the laws and regulations affecting special-needs families keep evolving.

Probably the most important thing parents need to learn is not to set aside assets in their child’s name because those assets will likely disqualify the child for government benefits such as Medicaid, Social Security Disability and Supplemental Security Income. In order to qualify, a child over 18 may not have more than $2,000 in their own name.

Parents can still save those dollars, but they must do it the right way, by establishing both an ABLE account and a special needs trust. Even if your children qualifies for government benefits, you want to leave money for things such as haircuts, movie tickets and extras.

Until the age of 18, children are usually served by school-based services and care that that may be covered by the parents’ insurance or may be tax-deductible, which is why parents often want to delay planning for the future. Circumstances can change at any time, though, so it’s important for these parents to not only have ABLE accounts and a special needs trust in place, but also to decide such issues as guardianship.

When the special-needs child becomes an adult, there are more considerations: Will they live at home, which may have the effect of reducing their SSI? Will they be able to become employed? What about their social and recreational needs?

Adults with disabilities need a team that can look after these needs because it’s too big a job for one person. The team may include siblings, but also an attorney, a financial planner, a caregiver and someone to oversee medical needs. All of these can be planned in advance so the parents have the peace of mind of knowing their child will be in good hands.

Parents of special-needs children are often so wrapped up in day-to-day concerns that it’s difficult – frightening, really – to think about the future. They deserve the advice and assistance of a financial professional who specializes in special-needs planning.

Mary Anne Ehlert, CFP, specializes in financial planning for families with a special-needs family member. She is the founder of Protected Tomorrows in Lincolnshire, Ill., and is a partner in Forum Financial. Her sister, Marcia, had cerebral palsy, and Ehlert developed her interest in special-needs planning from watching how her parents struggled to make sure Marcia was provided for. Contact Mary Anne at [email protected].