4 Steps to Smart Financial Planning for Parents With Special Needs Kids

Raising any child is expensive, but when you’re raising a child who has special needs, there are additional financial responsibilities to consider.

The cost of doctor’s visits, therapy appointments, medication and special equipment add up. The amount of time needed to provide care may restrict you or your partner from working outside the home — or even at all.

Depending on your child’s condition, you may need to provide them with lifetime support.

It can be overwhelming just dealing with the medical and emotional aspects of your child’s particular challenges. Here’s what to know so your finances don’t add to that stress.

4 Money Moves for Families of Children With Special Needs

1. Apply for Government Benefits

After your child is diagnosed, you’ll want to speak with a social worker who can help you understand what assistance may be available to your family and how to apply for that aid. Your child’s physician may be able to recommend a social worker, or you can contact your city or county department of social services.

A special needs attorney can also assist you. Robert Fechtman is a special needs attorney in Indiana and a former president of the Special Needs Alliance, a national organization made up of attorneys who specialize in disability and public benefits law. He helps families navigate the public benefits system and plan for their children’s futures.

Fechtman said families may qualify for financial assistance through Social Security.

The Social Security Administration gives out Supplemental Security Income, also referred to as SSI, to children with qualified medical conditions whose family’s income falls under a certain threshold. The amount of assistance, which is given out monthly, varies from state to state.

Once your child reaches adulthood, he or she may also be able to receive Social Security disability benefits, which provides income for an adult who isn’t able to work due to a medical condition.

Depending on your family’s income, your child may also qualify for free health insurance through Medicaid. Oftentimes if your child qualifies for SSI, he or she would also qualify for Medicaid. The Children’s Health Insurance Program, or CHIP, is available for families that make too much money to qualify for Medicaid but still can’t afford private health insurance.

Families that don’t qualify for publicly funded medical insurance might find an affordable health insurance provider via the Health Insurance Marketplace at HealthCare.gov. Outside of the annual open enrollment period, you can enroll if you have a qualifying life change, such as if you recently lost health insurance.

Fechtman also tells his clients to apply for Medicaid waivers, which allow those in need of long-term care to get free health care in home settings instead of a nursing facility. Children with special needs may qualify regardless of their parents’ income or assets. Each state operates its own Medicaid waiver program.

Fechtman said that many families aren’t aware of these waivers. There are often waitlists for applicants, so it’s generally one of the first things he brings up when meeting with new clients.

Families struggling with their finances should also check to see if they qualify for other public benefit programs, such as Temporary Assistance for Needy Families (TANF) or the Supplemental Nutrition Assistance Program (SNAP). TANF provides monthly cash assistance for families, while SNAP provides money specifically for buying food. Both are income-based programs.

2. Set up a 529 ABLE Account or a Special Needs Trust

When you’re applying for government aid, the administering agency will typically have rules about how much income your family can earn and how many assets you can own. Money in a traditional checking or savings accounts could restrict a family from receiving public benefits.

However, Fechtman said parents can save money in a 529 ABLE account or a special needs trust, and those dollars won’t count toward a family’s assets.

ABLE accounts are tax-deferred similar to 529 college savings accounts. However, ABLE account funds can be used for more than just education. Fechtman said qualifying expenses also include health, wellness and transportation expenses for a child with a qualifying disability.

According to SavingforCollege.com, families can withdraw the money tax-free and can have up to $100,000 in the account without it affecting the child’s eligibility for SSI benefits.

The annual contribution limit for 2022 is $16,000.

Fechtman said it’s relatively inexpensive to open and maintain an ABLE account. However, one downside is if the child dies, the money in the account must go to reimburse thestate for Medicaid benefits that were provided to the child.

Families that save money for a child in a special needs trust don’t have to worry about those savings going to reimburse the state. A special needs trust is a legal arrangement set up to hold money for someone with a disability so that the person can continue to receive public benefits. The trustees — those who manage the trust — generally have few restrictions on how the money in the trust is used as long as they don’t interfere with the beneficiary receiving government assistance.

Another difference between the two money-saving vehicles is the cost, which varies depending on factors such as who sets up the account and what state you live in.

Fechtman told The Penny Hoarder in 2019 that an attorney might charge around $1,500 to draft a special needs trust. However, families can also join a pooled trust managed by a nonprofit organization, which could cost half that. Setting up an ABLE account could cost as little as $50, he said.

3. Look Into Assistance from Nonprofits

Government programs aren’t the only source of assistance. Nonprofit organizations also provide help to families struggling financially.

Here are just a few organizations that help families in need:

• The M.O.R.G.A.N. Project has a pediatric disability equipment exchange program that lets families receive donated medical equipment for free.

• Ronald McDonald House Charities provides families with places to stay when they have to travel so that a child can receive extended treatment at a hospital away from home. Families may be asked to make a nominal donation, but no family is turned away if they can’t pay.

4. Establish End-of-Life Plans

No parent wants to think about a situation where they aren’t alive to care for their child’s special needs, but it’s important to prepare for your child’s care once you’re gone.

“Every person who’s got a disabled child is horrified by the notion that they’re going to die before that child and that the child won’t have the care and support and everything that the parents provide,” Fechtman said.

Having a will is a must. Fechtman said the will should direct inheritance money to a special needs trust so that the child can continue to qualify for public benefits.

Designating who will become the child’s guardian is also key, he said. Parents should look for someone who would be able to provide proper care.

In addition, Fechtman said parents should have an adequate amount of life insurance to provide for their family in the event of their untimely death.

He recommends parents — specifically those in a two-parent household — get a survivorship life insurance policy, also known as a second-to-die life insurance policy. It covers both parents, but it doesn’t pay out until both parents are deceased.

One benefit of this type of policy is that premiums are generally much lower than for other policies. Another benefit is that coverage lasts until the policyholders die — unlike term life insurance, which ends after a certain number of years. This is especially important for parents who have special needs children, because those children may not be able to be independent and support themselves once they reach adulthood.

Of course, single parents wouldn’t be able to open this type of policy, and it may be insufficient if one parent is the household’s sole income earner.

“If you only have one breadwinner, you’d need to have individual insurance on that breadwinner,” Fechtman said. “Maybe you’re lucky enough that they have some kind of life insurance through work, so maybe you wouldn’t have to run out and get a seperate policy.”

The important thing is to have a plan in place so that your child is financially taken care of no matter what.

Editor’s note: This article was originally published in Feb. 2019. Nicole Dow is a senior writer at The Penny Hoarder.

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