Money Management

Financial Planning for Special Needs Families

By  Anna Baluch

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Traditional financial planning focuses on buying a home, raising children, funding college, and retiring. Special needs financial planning, on the other hand, is designed to help you manage your money so that you can provide for the lifelong needs of your child with special needs. 

While the needs of every special needs family are unique, this article aims to provide a variety of education, tools, and resources that you may find valuable.  Let’s dive deeper into financial planning for special needs families.  

Early Childhood Intervention Programs

Early Childhood Intervention (ECI) programs are intended to support families with the special needs resources their children need to thrive on a physical, cognitive, and social level from birth to six years of age. They can make a positive difference in the lives of those with developmental delays, disabilities, or specific medical diagnoses that may interfere with the way they develop. 

If your child is referred to an ECI program by a healthcare provider, teacher, or social service worker, tests, observations, and interviews may be performed to gain a better understanding of how early intervention can help them. Then, an early intervention team will work with you to design an Individualized Family Service Plan that will be tailored to your child’s specific goals. 

Your child’s Individualized Family Service Plan may include services such as parent education, developmental therapies, and support services that aim to help your child’s development. Their services may be provided in a variety of environments including your child’s home, play group, child care center, and/or special education classroom.

The underlying goal of an ECI program is to promote collaboration among you, service providers, and other important individuals in your child’s life so that you and your child can live happy, healthy, and fulfilling lifestyles.

So how much does an ECI program cost? It depends on the state you live in and the extent of services your child requires. To make it more affordable, you may be able to enroll in a Family Cost Share Program, where you can pay a set monthly price, regardless of the amount of services your child receives. 

Federal Benefits for Special Needs Families

Fortunately, there are a number of federal benefits you can take advantage of in order to alleviate the financial burden that often comes with raising a child with special needs. Here are some options for you to consider.

  • Supplemental Security Income (SSI): If you’re a low-income family with a child that meets the SSI disability criteria, you may be eligible for SSI. SSI can provide you with a monthly payment to cover basic necessities such as food, clothing, and shelter. Depending on the state you live in, you may also receive a supplement on top of your SSI checks.
  • Medicaid: Medicaid is designed to help people with limited income pay for their medical expenses. Fortunately, many states have expanded Medicaid coverage so you it may be an option for you even if it wasn’t in the past. If you qualify for this program, it may pay for all or a significant portion of your child’s doctor’s appointments, treatments, support services, and in-home medical equipment. 
  • Children’s Health Insurance Program (CHIP): In the event you can’t afford private healthcare but are ineligible for Medicaid because your income is too high, CHIP may be available to you. CHIP is a state and federally funded program that can help make your child’s medical care more affordable. 
  • Temporary Assistance for Needy Families (TANF): TANF offers temporary assistance for low-income parents who care for their children at home while promoting work, job preparation and marriage. Monthly cash payments and eligibility requirements vary by state and are available to all families, including those who are raising a special needs child. 
  • Supplemental Nutrition Assistance Program (SNAP): Formerly known as food stamps, SNAP helps low-income families cover food expenses via an electronic debit card. Each state has its own eligibility requirements. While the program is not limited to children or adults with special needs, there are special eligibility provisions for them.

What is a Special Needs Trust?

If you’d like to leave money for a special need’s child, careful planning is a must. Otherwise, you may jeopardize their ability to collect SSI and Medicaid benefits. That’s where a special needs trust comes in.

Also known as a supplemental needs trust, a special needs trust can allow your child to maintain their eligibility for public benefit programs while also receiving supplemental funds. Supplemental funds can be used to pay for a variety of goods and services that are not covered by public programs like SSI and Medicaid. The trustee, who may be you or someone else will have total discretion over the trust and be responsible for spending money on behalf of the special needs child.

It’s important to note that funds from a special needs trust can solely be used for special therapies or devices like wheelchairs, accessible vans, mechanical beds, and other medical expenses that are not paid for by public programs. They may also be used for recreational and cultural experiences that may enhance your child’s life. These may include summer camps, vacations, and outings with friends.

Benefits of a Special Needs Trust

There are a number of noteworthy benefits of a special needs trust including: 

  • Keeps Your Child Eligible for Governmental Benefits: A traditional trust may disqualify your special needs child from receiving benefits like Medicaid and SSI. With a special needs trust, however, they can remain eligible for these types of benefits while also having the funds to pay for services and goods that they do not cover. 
  • Allows You to Save on Taxes: You can deduct the funds you use to create a special needs trust from your taxes. Consult your CPA or accountant for more information. 
  • Enhances Your Child’s Quality of Life: Since a special needs trust aims to pay for benefits like education, entertainment, and vacations that government programs do not provide, it can drastically enhance your child’s lifestyle. 
  • Ensures Asset Protection: Creditors do not have control of the funds in a special needs trust. If you’re the trustee, you are the only one that has a say in what can be done with the funds. You don’t have to worry about the money being seized by someone else. 

How to Set Up a Special Needs Trust

If you’d like to set up a special needs trust for a special needs child, here are some things to consider.

  • Amount of Money: The child’s disability and level of care they require can help you figure out how much money to put in a special needs trust. While there is no minimum threshold, some experts suggest at least $100,000. This is because of the high costs associated with the setup and management of a special needs trust. You can fund the trust with cash, inheritances, family assets, or even life insurance policies if one or both of the child’s parents pass away.
  • Type of Trust: There are three types of special needs trusts: first-party special needs trusts, third-party special needs trusts, and pooled asset trusts. You may opt for a first-party special needs trust if you accumulate assets before the onset of the child’s disability or after you qualify for Medicaid or SSI. A third-party special needs trust may be a good option if you’d like to collect funds from others like grandparents who wish to help the special need’s child. A pooled asset trust may be worth considering if you’d like to join other people in special needs situations to develop a shared trust because you can’t think of a good trustee or would like to leave a modest sum. 
  • Professional Assistance: Since there are a lot of complexities associated with setting up a special needs trust, it’s a good idea to invest in a financial advisor who specializes in special. They Can guide you through the process, make sure you’re abiding by all the rules and requirements, and provide you with some much needed peace of mind.

Questions to Ask a Financial Advisor About Setting Up a Special Needs Trust

  • What responsibilities does a trustee have? A special needs trust is more complicated than other trusts you may set up. Therefore, it’s essential to clarify the duties you’ll have if you become a trustee.
  • What type of trust is best for my situation? You may have an idea of what type of special needs trust makes the most sense for you. However, you still want to ask an advisor for their professional recommendation. 
  • What expenses can the trust pay for? A financial advisor should be able to provide you with details on how the trust funds can and cannot be used. 
  • What happens when the beneficiary passes away? While this isn’t something you may want to think or talk about, it is important to ask an advisor what will be done with the funds once the beneficiary dies.

What is a 529 Able (529a) Account?

In 2014, Congress passed the Stephen Beck Jr. Achieving Better Life Experience (ABLE) Act. It offers a new type of tax-advantaged savings account for qualifying disabled individuals and allows them to retain their eligibility for public benefits. 529 Able Accounts serve as alternatives to special needs trusts and are administered by each individual state, similarly to 529 college savings plans.They are designed for disabled individuals who are under 26, meet the criteria for SSI or SSDI, and have a disability certification as well as an official diagnosis by a physician. 

As long as the funds are used to pay for certain disability expenses such as education, job training, and healthcare, the money may be withdrawn tax-free. A 529 Able Account can accumulate $15,000 per year in 2020 without disqualifying the special needs individual for public benefits. If an Able Account exceeds $100,000, however, SSI benefits will be suspended. 

Benefits of a 529 Able Account

A 529 Able Account offers a number of benefits including:

  • Offers Tax Benefits: The money earned in an Able account is not subject to taxes by the state or federal government. Also, any money withdrawn from it will not be taxed if it’s allocated toward Qualifying Disability Expenses. 
  • Allows a Special Needs Child to Receive Federal Benefits: Just like a special needs trust, a 529 Able Account will allow you and others to save money for a special needs child’s future without impacting their eligibility for public benefits.
  • Supports a Special Needs Child in an Affordable Way: When comparing the costs of setting up a 529 Able Account and special needs trust, an Able Account is considerably less expensive. 

How to Set Up a 529 Able Account

If you’re interested in a 529 Able Account for a special needs child, be sure to keep the following in mind.

  • Eligibility to Open a 529 Able Account: Make sure you have the right to open a 529 Able Account. Generally speaking, you can do so if you’re a parent, beneficiary, or an agent that has been designated by a power of attorney. 
  • Online Application Process: All states that offer 529 Able Accounts allow you to apply online and receive any assistance you may need by phone or email. Online applications can be found on state-specific Able program websites. 
  • Fees: Each state has its own fees for anyone who wishes to set up an Able Account so it’s important to familiarize yourself with these fees in your specific state. In Ohio, for example, you’ll have to pay $2.50 per month or $30 annually for account maintenance as well as asset-based fees that range from 0.19% to 0.34%. While Tennessee doesn’t charge fees for account maintenance, the state may take up to 0.63% depending on the investments made.
  • Able National Resource Center: Managed by the National Disability Institute, the ABLE National Resource Center is loaded with information about 529 Able plans. It’s a great resource if you have any questions about the program. 
  • Professional Assistance: While you can go online to research and set up a 529 Able Account on your own, it’s wise to consult a financial advisor before doing so. They can inform you of whether it’s a better option than a special needs trust and educate you on the ins and outs of the program as it applies to you. 

Questions to Ask a Financial Advisor About Setting Up a 529 Able Account

If you do speak to a financial advisor before you set up a 529 Able Account, here are some questions you may want to ask.

  • How does a 529 Able Account differ from a 529 college savings plan? If you’re familiar with 529 college savings plans or currently have one, you may wonder what makes it different than an Able Account. A financial advisor can outline the similarities and differences of both options.
  • What happens to the funds once the beneficiary dies? Find out what will be done with the money in an Able Account if the beneficiary passes away. Both the federal government and state you live in will help determine the answer to this question so it’s smart to ask it.  
  • Am I a good candidate for a 529 Able Account? A financial advisor can inform you of whether a 529 Able Account makes sense for your situation. It’s important to get their perspective before moving forward and opening an account. 

Financial Advisors Who Work with Special Needs Families

There are countless financial advisors out there. However, only a select group of them have the special knowledge and training required to support special needs families. If you have a special needs child, it’s in your best interest to find a financial advisor who specializes in special needs planning. They’re more likely to help you meet your short and long-term financial goals than a traditional financial advisor who serves all types of families. 

Advisors with Chartered Special Needs Consultant Designation (CHSNC)

The Special Needs Consultant Designation (CHSNC) provides financial advisors with the strategies they need to help special needs families thrive. To become a CHSNC, an individual must have at least five years of professional experience in financial services or law or four years of professional financial services experience and at least a bachelor’s degree. 

Those who have earned the credential have a special understanding of what it’s like to live with special needs so they can adequately address the concerns, hopes, and goals of special needs families. They focus their work on individuals with disabilities that have unique requirements. 

You can expect a CHSNC to be well-versed in a variety of topics such as disability law, special needs trusts, the Able Act, Medicaid, Social Security, special education, estate planning, and retirement planning for three people. A CHSNC is highly recommended to help you come up with a financial plan for your special needs family. 

Closing Thoughts

There’s no denying that financial planning for special needs families can be complicated. After all, there are a number of additional medical and educational expenses they often face.The good news is there are plenty of resources that may simplify the process and provide your family with the knowledge and tools it needs to succeed today, tomorrow, and years down the road. 

Anna Baluch

Anna Baluch

About the author:

Anna Baluch is a freelance writer from Cleveland, OH who enjoys writing about a variety of personal finance topics. She quit her day job in October 2018 to enter the wonderful world of entrepreneurship and hasn’t looked back since. Her work can be seen on LendingTree, Credit Karma, Nav, Freedom Debt Relief, and a number of other well-known publications. When she’s not writing, she can be seen volunteering and trying new restaurants.

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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