Financial Planning for a Loved One With Special Needs
By: Ivailo Grigorov, MBA, ChSNC®
Children and adults with special needs touch others’ lives in remarkable ways. The joy and happiness – and sometimes the challenges – they bring to the people involved in their lives can be extraordinary. The day-to-day care and devotion required by someone with special needs can often be all-consuming. As a parent or caregiver, you may struggle with feeling overwhelmed and find it difficult to think beyond “one day at a time.”
You have one hope for the future: that your loved one lives a long, productive and happy life. Ensuring future financial security and quality of life requires more than hopes and dreams alone. It requires special planning for your future and the lifetime of your loved one with special needs. Here are six questions to consider as you plan for the future.
1. When should we start planning for our loved one?
There is no magic formula or age you should start thinking about this. The sooner you start, the better you will feel. It is important to keep in mind that planning is a process, and we can manage it over time. We start with what we know today, and as time moves on and circumstances change, we can update the plan.
2. Who should be involved in the planning process?
When you’re planning for a loved one with special needs, it’s always good to have a team on your side, helping you navigate the process. This type of planning is very complex, and it’s impossible for one person to be an expert on all of it. To set yourself up for success, your team should have at least three people:
- A financial professional (like me) to help you plan for all the financial goals you have for your loved one and for yourself;
- A specialist (like LBSA) who can help you take advantage of the government benefits you’re eligible for and resolve care management issues;
- And an attorney who has experience working with families like yours.
- You can also include family members and/or trusted others who may be responsible to help carry out the plan in the future.
If you don’t already have a team like this, it’s okay. It’s important to put one together as soon as you can.
3. Is there any government assistance our loved one can qualify for?
Most government programs are means-tested, which means that the parents’ income, assets and household size determine the eligibility for benefits. Your child/adult with special needs generally cannot have more $2,000 to $3,000 in assets (depending on what kind of social security they qualify for) in their name in order to qualify. Additional requirements apply at different stages in life. Planning ahead helps to ensure your child can qualify for assistance at age 18. The two most common benefits a family would want to explore are Medicaid coverage and Supplemental Security Income (SSI).
4. We already receive benefits, but it is not enough. What else can we do?
The two most common ways to provide long term for a child with disabilities are outlined below. It’s important to understand how using these two strategies can ensure that someone can still qualify for benefits and not be disinherited.
Special Needs Trusts (SNTs)
A special needs trust can be funded by a family member for the benefit of a child/adult with special needs. An estate planning attorney that specializes in special needs trusts can establish all the correct provisions to ensure preservation of benefits.
Achieving a Better Life Experience (ABLE) Accounts
ABLE accounts are liquid savings accounts that are overseen by state departments and allow us to grow funds on a tax-free basis similar to a ROTH IRA. These amazing tools, passed into law in 2014, are also known as 529A plans.
5. What is right for our family? Should we open an ABLE account or SNT?
The answer really depends on each individual family’s circumstances. Many people choose to establish both tools at some point. I like to think of the ABLE account as more of a goal-oriented, short-term saving tool. The funds are liquid as long as the account is used to fund items intended to benefit the person with special needs. Some families use them to create savings for a future home purchase. The SNT is a longer-term solution that enables us to leave larger inheritance to include real estate, retirement accounts, business interest, life insurance, etc. that an ABLE account can simply not absorb.
6. How can other family members help?
Make sure to have conversations with your loved ones and educate them on proper ways they can help provide for your child/adult. One of the common mistakes we see is that grandparents and other relatives will leave inheritance behind directly to an individual with special needs. This can jeopardize benefits. Another mistake parents/grandparents make is funding 529 plans, which, despite popular belief, are countable assets that impact government benefits, unlike an ABLE account. Our goal when working with families is to educate on proper ways to plan to maximize your benefits and overall well-being.
More Information and Support
LBSA is here to help you find resources and information on ensuring a future of possibility. A FREE consultation from Family Navigation Services is available for your loved ones with intellectual or developmental disabilities (IDD).
About the Author
Ivailo Grigorov, MBA, ChSNC®, is a Financial Advisor with Northwestern Mutual and a parent of a child with Prader-Willi Syndrome. He can be reached at ivailo.grigorov@nm.com or (913) 748-0662.