Planning for a Child with Special Needs

Jackie Bedard
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Planning for family members with special needs can be an overwhelming endeavor, especially when these kinds of decisions have lifelong consequences. Parents agonize over the intricacies of government programs, guardianships, governmental services, and the legal documents needed. 

I recently read an article in The New York Times that profiled, Christine Salerno, the single mother of a 4-year-old daughter with Rett syndrome, a rare neurological disorder.

Salerno tells the Times she spends endless late nights researching the types of therapies and services from which her daughter would benefit. "She has 10 therapists and 15 doctors, and I manage all of this. ... This is a lifetime thing. ... I can be as hopeful as I want, but I still have to prepare." 

If you are like Salerno, who is overwhelmed with the responsibility of planning for the future of her child with special needs. The Times article offered six great planning tips for families doing just that.

1. Getting Started

When saving for retirement, parents should set aside money for the child that won't be consumed by their own long-term care expenses. In line with that thought, depending on the state, one important benefit will likely be Medicaid, which provides healthcare coverage for people over 18 with disabilities. Additionally, it provides entry to programs and services that help with learning tasks and life skills, and it helps pay for group residencies.

Many parents put money into a special needs trust to supplement these benefits. Doing so allows them to use these funds to help pay for the child's individual needs without losing government benefits.

2. New Tool

The ABLE or 529A account, a new tax-advantaged savings account, is expected to become available in 2016. This new savings vehicle is expected to allow people to save more. Usually, anything over $2,000 in savings or other assets disqualifies someone from receiving disability benefits, such as Medicaid and Supplemental Security Income (S.S.I.). 

However, because of its limitations and drawbacks, the 529A account is not expected to replace the need for trust accounts. For one, total contributions to the account cannot exceed $14,000 a year. Second, once the balance exceeds $100,000, the disabled person's S.S.I. benefits are cut off. Third, after the disabled individual dies, the state's benefit program may claim the money left in the account.

Furthermore, contributions to the 529A are not tax deductible. However, the money is allowed to grow tax-free, as long as the funds are used for reasons related to the person's disability. In the end, the new account will likely be most useful to those disabled people who want to work and save more than $2,000, and/or for families who want an account to deposit gifted money or inheritances.

3. Trusts

Among the many special needs trusts, families who want to supplement a disabled child's income from government-funded programs often use "third-party" special needs trusts.  This trust can be funded in many ways and are quite flexible.

Another option is a pooled trust. These are trusts that are professionally managed alongside other people's funds in a "pool." Any remaining funds in the trust at the time of the person's death may go to the state or to the organization managing the trust.

4. Insurance

Many families use insurance-such as life insurance and term insurance-to fill the gaps in the supplemental trusts. Ultimately, these families must consider the needs and individual circumstances first, and then look at the insurance options available.

5. Guardians

Families agonize over who will be their child's guardian once they are gone, as well as who will serve as trustee over the trust accounts. One strategy is to split these responsibilities between two people so as not to overwhelm one individual, and to keep people in check.

However, choosing a non-professional family member to oversee the money comes with its own risks. As much as someone may care, the person might not have the capability, skill, or time to do the job effectively.

6. Getting Help

Most families with a loved one with a disability find it helpful and comforting working with professionals experienced in resolving these issues. Our firm is here to help, whether that involves creating a special needs trust or guiding clients through making decisions regarding insurance, qualifying for government benefits, or guardianship.

We hope this information was useful to you and helps your clients and their families. If you have a specific case or a question, don't hesitate to call our office at 919-443-3035 or use our contact form