Saving for college. Planning for retirement. Caring for aging parents. The further into adulthood you move, the longer your list of financial responsibilities seems to grow. For parents of children with special needs, they must also consider that their child may continue to live with and remain financially dependent on them well into the future.
“It lends a whole new meaning to the ‘sandwich generation,’” says Gordon Homes, an Indianapolis-based MetLife Special Needs Financial Planner who has a 21-year-old son with Asperger’s syndrome and Crohn’s disease. “When you combine the complexities of government benefits, legal and financial issues, it is complicated.”
Parents of a child with special needs must not only manage their current and future financial health, but also have a plan to provide financially for a child once they are gone – in such a way that doesn’t jeopardize their child’s eligibility for essential needs-based government resources.
That’s crucial because if a child has more than $2,000 in assets in his or her name, that individual will typically no longer qualify for benefits such as Medicaid or Supplemental Security Income (SSI).
Special-needs trusts were created as a way for parents and others to direct money to a child, including inheritances and life insurance payouts, without causing the loss of valuable benefits.
Typically, the child’s parents serve as the trustees to oversee the trust and name someone else, or a group of people, to take over those responsibilities when they die. The funds in the trust are used to cover the costs of the child’s care not covered by insurance or government benefits.
“Establishing a special-needs trust is really the only way for parents to leave money to provide for their child,” says Melissa Justice, Director of The Arc of Indiana Master Trust, which launched in 1988 as the first special-needs trust of its kind in Indiana and one of the first in the nation.
A special-needs trust can be established at any point in a child’s life. Many parents take this step when their child turns 18 and guardianship is established. However, Justice stresses that the sooner a trust is put in place, the better. Without it, she says that if a child is left money or receives an insurance payout, he or she could be in danger of losing their benefits.
Parents also have the option of opening an ABLE Account – a federal program signed into law in Indiana this spring – to contribute up to $14,000 total a year to a tax-exempt savings account to provide for eligible children with special needs. Much like a 529 college savings plan, parents, family and friends can all contribute to the account, as long as the total does not exceed the annual contribution limit. However, these accounts do have Medicaid payback at the end of the child’s lifetime.
Assembling a team
Most importantly, parents of children with special needs should seek out expert advice when crafting a financial plan for their family. Attend workshops on the topic, reach out to local advocacy groups and talk to other parents about their experiences.
Several financial institutions have advisers who are certified to work with families seeking special-needs guidance, and there are local lawyers who specialize in this area too, since the legal and financial planning for a child with special needs often overlaps. “Generally, it works best when a special needs financial planner and special needs attorney work with the family as a team,” says Gordon.
As overwhelming as financial planning can be, parents of children with special needs need to educate themselves and consult with appropriate experts and professionals. With the proper systems in place, they can ensure their child’s care and quality of life continues long after they’re gone.