Having a child with special needs changes everything, including financial plans. While other children are expected to eventually become self-sufficient, a special needs child may need care for the rest of his or her life.
“The one thing that keeps us up at night is who is going to fill in for me,” says Kelly Piacenti, head of SpecialCare for MassMutual and the mother of a special needs child. Without proper plans in place, it could be the state that steps in to manage care, and for many parents, that isn’t necessarily reassuring.
Andy Schwartz, a certified financial planner and principal with Bleakley Financial Group in Fairfield, New Jersey, doesn’t have a special needs child, but he is a father. “I would be very uncomfortable with the idea of leaving that child in the hands of the government,” he says. His clients with special needs children often feel the same way.
However, that doesn’t mean these parents don’t get some help from government programs. Social Security, Medicare and Medicaid may all provide services that help lighten the load. The key for parents is to find a way to set aside money for their child’s care without inadvertently making them ineligible for government assistance. Here are seven ways to prepare for the potential costs of a special needs child:
Step 1: Find the right expert. Before getting too far into the planning process, parents should seek out experts who have experience in the area. Piacenti says MassMutual has 600 planners who work with special needs families, and there is a Chartered Special Needs Consultant designation available through The American College of Financial Services. Families can also find attorneys who specialize in special needs planning. “They have an incredible vantage point because they work with so many families,” says Christopher Krell, a certified financial planner and principal with financial firm Cassaday & Company in McLean, Virginia.
Step 2: Select the right planning vehicle. In order to remain eligible for government benefits, special needs children need to be practically destitute, Krell says. For some programs, having as little as $2,000 in the bank is enough to disqualify a person. Fortunately, there are two ways to set money aside for a child’s care without disqualifying him or her from government assistance.
- Supplemental or special needs trust. Money from an estate, life insurance policy or other source can be deposited into a trust. The trust owns the assets, and a designated trustee controls how they are spent.
- ABLE accounts. Named for the Achieving a Better Life Experience Act of 2014, ABLE accounts allow parents to set money aside for their child’s future needs. While there is no tax deduction for contributions, money withdrawn from the account is tax-free so long as it is used for qualified expenses.
Trusts are the less restrictive option, but ABLE accounts are inexpensive and don’t require a lawyer to set up. “The ABLE [accounts] are so great because they are so simple,” Krell says.
Step 3: Carefully select a trustee. Parents setting up a trust need to be thoughtful about who they choose as the trustee. This person will control the assets, so they must be trustworthy above all else. Some parents may prefer to have the trustee be the same as the child’s anticipated caregiver. That way it will be simple for the caregiver to access money as needed.
However, parents shouldn’t assume one of their other children will want to step into that role. “We’re hearing more and more that siblings don’t want to take over and be involved,” Piacenti says. Before naming anyone to be trustee, the family should have a meeting with all involved relatives to determine what roles people are willing and able to play.
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