Create a Financial Safety Net For Families with Special Needs

Jeff Vistica
CFP®, ChSNC®, AIF®
September 9, 2022

Neurodivergent families confront unique challenges. Parents may be in a situation where they have to plan for the care of their minor or adult children long after their death.

The data on lifespan for those with any type of disability varies depending on the type of disability at issue. 

Adults with any type of developmental disability die an average of 23.5 years earlier than adults without any disability. Those with cerebral palsy and other “co-occurring” disabilities die up to 34 years earlier. About 52% of adults with cerebral palsy (and other rare disabilities), die between the ages of 18-39, compared to only 4% who die between these ages without disabilities.

Individuals with an intellectual disability die an average of 12.7 years earlier.

If you have a child with any kind of disability, you can’t rely on general data or averages. You need to plan for continuing care for your child after you’re no longer able to provide it.

Here are some decisions you can make that will provide a financial safety net for your child.

1. Appointing a guardian for your minor child

Because each situation is different, this is a good time to assess the current and future needs of your child.

You may need to appoint someone (called a “guardian”) to look after the health and related issues of your child after you’re gone. 

There are different types of guardianship, and details will vary from state to state:

  • A “guardian of the person” makes decisions to ensure proper care, housing, and supervision. This type of guardian also deals with end-of-life decisions.
  • A “conservatorship” is a type of guardianship used to manage the finances of those who have other income but can’t do so themselves.
  • A “limited guardianship” restricts the authority of the guardian to make decisions in certain areas, like medical decisions.
  • A “temporary conservatorship” is the appointment of a guardian on a temporary basis to deal with an emergency situation.  This form of guardianship is most often accompanied by a request for a permanent conservatorship.

Because children are no longer considered minors once they reach 18, decisions about guardianship should be made prior to that time. 

If it’s a possibility, less restrictive options should also be considered. Supported Decision-Making, for example, would allow for your child to continue to be able to make decisions with a support system. National Resource Center for Supported Decision-Making is a good resource to review.

There are many alternatives to appointing a guardian, some of which may be suitable for your child.  They include setting up a particular type of trust (living trust or special needs trust), and having a Power of Attorney in place, giving others the ability to manage financial affairs and make health care decisions.

2. Selecting a guardian

Selecting a guardian for your child with special needs is a significant decision that should be made after careful reflection and extensive due diligence.

The primary consideration is whether the guardian has the willingness and ability to fulfill the responsibilities you have delegated. Under some circumstances, the guardian will be taking over the role of a parent. You need to be convinced they have the time, resources, personal flexibility, and resources to meet such a heavy responsibility.

When you have decided on a guardian, you should appoint that person in a will. You should also appoint a successor guardian.

3. Consider a special needs trust

There are a number of government programs that benefit those with special needs, like Social Security, Medicaid, and various state-sponsored programs. A properly drafted special needs trust can maximize eligibility for these programs.

The laws governing these benefits stipulate that the beneficiary can’t have assets over $2000 in total.  California is removing its asset limits for Medicaid eligibility. Starting July 1, 2022, the asset limit for Medi-Cal applicants will go from $2,000 to $130,000. California plans to eliminate the asset test completely by July 2024. In the meantime, applicants may still find it prudent not to name your child individually in your will or as the beneficiary of your insurance. Instead, the special needs trust should be the recipient of these funds.

4. Speaking of wills...

Having a will is important for just about everyone, but it’s especially critical for parents of neurodiverse children.

By having a will, you ensure the special needs trust is the beneficiary of the assets you wish to benefit your child. As stated above, that’s also where you designate the guardian for your child.

5. Appoint a trustee

You will need to designate a trustee for your special needs trust. If the assets in the trust are significant, you should consider appointing a professional trustee.

The role of the trustee is to ensure the terms of the special needs trust are faithfully executed, which means your directions (as set forth in the trust document) will be carried out. It is often recommended to also establish a trust advisory committee, especially when the trustee may not know the beneficiary well. 

6. Establish an ABLE account

An ABLE account is a tax-advantaged savings account for people with disabilities and their families.  There are eligibility requirements, caps on total annual expenses, and restrictions on allowable expenses from this account.  

For more information about ABLE accounts, go to the website of the ABLE National Resource Center.

ABLE National Resource Center also provides a guide: Understanding ABLE Account Savings and Public Benefits.

7. Retain a financial advisor with special needs expertise

Financial planning for parents of children with special needs is both challenging and complex.

An estimated 18% of children in the U.S. have health care needs related to a special need.

These costs can be substantial. Autism costs an average of $60,000 annually for special services, including lost wages. Government programs like Medicaid cover less than half of these health care expenditures.

A special needs financial planner will be familiar with Medicaid, Medicare, and Social Security Disability Programs. They can also advise you on the different types of life insurance, annuities, and other investments you should consider.

They are knowledgeable about the costs of group homes, day programs, personal care professionals, and long-term care facilities and should be able to assist with tax and estate planning.

They will calculate and incorporate these projected costs into a long-term financial plan.

How do you find a qualified financial advisor with expertise in special needs financial planning?

Look for someone who is a registered investment advisor (RIA). RIAs are required by law to always act in your best interest, disclose all conflicts, and resolve those that exist in your favor.

Check to see if the financial advisor you are considering has designations indicating advanced study in financial planning. Some of the most respected ones are Certified Financial Planner (CFP®), Chartered Special Needs Consultant (ChSNC®), Accredited Investment Fiduciary (AIF®), and Chartered Financial Analyst (CFA®).

The financial advisor you retain can make recommendations for the balance of your special needs team, which will likely include an attorney and a CPA.

Build A Financial Safety Net for Your Child

Providing a financial safety net for your child will ensure them a better future that they deserve, especially when the time comes that you won’t be able to provide it. From appointing a guardian up to choosing a special needs financial planner, you have to reflect on these decisions. Learn more about how to create a financial safety net with our special needs financial planner at Valiant Partners. Set up a call →.

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