Financial Planning Tips When Caring for Special Needs Children
We have all heard the somewhat over-used expression, "It takes a village to raise a child," but when that child has special needs, the expression might be an understatement and the support team often includes doctors, therapists and specialists on board to help. But there’s another resource many parents don’t think about: A financial advisor.
How can a financial advisor help?
According to reports, it costs about $233,610 to raise a child from birth to age 18. When a child has special needs, these costs can easily be three to four times that much.
The nonprofit organization Autism Speaks estimates that it costs anywhere from $1.4 million to $2.3 million to care for an autistic person over their lifetime (31 percent of children have an Autism Spectrum Disorder (ASD)).
If you’re the parent of a child with special needs, you likely have familiarity with these extra expenses firsthand. There are so many different factors at play when you’re the parent of a special needs child. That’s why it’s vital that you take financial planning seriously today, so you can make sure your child is financially cared for for decades to come.
At Linscomb & Williams, we have clients who have to juggle these extra expenses, so we’ve compiled our top financial planning tips for parents with special needs children.
Tips That Can Help Now
1. Build a Support Team
Raising a child with special needs is a lot of work, and trying to do everything on your own can quickly lead to physical and emotional burnout. Instead, seek out support groups in the area. It can be incredibly therapeutic to talk with other people who are facing similar challenges. Other parents may offer helpful insights you’ve never thought of before.
If you have a loved one who you want to care for your child if something should happen to you, it’s wise to include them in the process now. Invite them over as you do your day-to-day routine. Ask them to babysit if you need to go out of town. Depending on your child’s age, you can even seek his or her input regarding who they’d like to be involved in their life.
2. See If You Qualify for Government Assistance
Assuming your child meets the IRS’s definition of a disability, you may qualify for federal programs such as Medicaid and Supplemental Security Income (SSI). These programs help alleviate the financial burden of raising a child with special needs, but some are only available to low-income earners.
If you don’t qualify for these programs now, you may still want to take the time to learn about them, because there’s a chance your child may qualify for them on their own once they turn 18.
- Supplemental Security Income (SSI). This federal program provides a cash allowance each month for basic needs like food, clothing and shelter. There are requirements to qualify for SSI.
- Medicaid. Medicaid helps cover the cost of healthcare expenses, medical equipment, home health aides and other assistance. The program is federally funded, but eligibility varies from state to state. Generally, if your child qualifies for SSI, then they also qualify for Medicaid. If you live in Texas, financial planning firms in Houston can help you understand your options.
- Children’s Health Insurance Program (CHIP). If you’re not eligible for Medicaid, look into CHIP. This program helps provide health insurance to families who can’t afford private healthcare but don’t qualify for Medicaid. CHIP is a joint federal-state program, so it may be called something different in your state.
- Nonprofit grants. There are several nonprofit organizations that offer grants and scholarships to help alleviate the costs of caring for a child with special needs. Common ones include Action for Autism, The Arya Foundation, The Different Needz Foundation, My Life Without Limits and Wheelchairs 4 Kids. If you’re in the Houston area, talking with financial planning firms in Houston that specialize in helping families with special needs children can help you identify programs.
3. Save for Your Child's Future
There are often lifetime costs to plan for when raising a child with special needs. However, saving for your child’s future can decrease their chances of qualifying for government aid.
What should you do in this catch-22 situation?
Accounts like 529 ABLE and a special-needs trust may help.
- 529 ABLE. These accounts work similarly to a 529 college savings plan (read our tips for new parents), but the money can be used for any disability-related or education-related expense. The best part? This account doesn’t count toward your child’s SSI eligibility as long as the total balance is under $100,000.
- Special-needs trust. For high-income earners, an ABLE account can give you a jump-start on securing your child’s future. But a special-needs trust can offer even more opportunity to save without jeopardizing your child’s government benefits. There are many different types of special-needs trusts: First-party, third-party, pooled, stand-alone, etc. With so many from which to choose, there’s bound to be one that fits your situation. Talking with financial planning firms in Houston can help you choose the best for your specific situation. Special-needs trusts can be more complicated than ABLE accounts, so working with a financial advisor you trust can help you choose the right account and help you set it up.
Tips That Can Help Ensure Your Child is Cared for After You’re Gone
Estate planning is a critical part of the financial planning process. And it becomes even more important when you are planning for the future of a child with special needs.
While the estate planning process typically involves drawing up a will, naming beneficiaries and appointing a trustee or custodian, there are 3 extra key pieces you don’t want to leave out as the parent of a special needs child.
1. Review Your Life Insurance Policy
Due to the lifetime costs of raising a child with special needs, you’ll want to make sure your life insurance policy is the right size to cover your child’s financial needs after you’re gone. A trusted fiduciary financial advisor can help you choose between a whole life or term life insurance policy and help you decide how much you need.
2. Consider Life Insurance for Your Child
Parents often make huge financial sacrifices to care for a child with special needs. If your child passes prematurely, a life insurance policy can help cover the burial costs and help you save for your future retirement.
3. Write a Letter of Intent
No one knows your child better than you. Ensure your family and friends know all the personal details of your child’s routine by writing a letter of intent. Include helpful information such as your child’s personal likes and dislikes, their medical history, your hopes and dreams for them, etc. This document isn’t legally binding, but it can help reassure your loved ones that they’re properly taking care of your child.
How We Can Help
Caring for a child with special needs can be overwhelming. Thinking of the lifetime financial costs that come with it can be even more overwhelming. No matter your child’s age, it’s important to meet with a trusted financial advisor who can help you secure their future and your own.