Building Financial Security for a Child with Special Needs

A friend shared with me…Several of our friends had kids at the same time as us, and we started noticing that our son was developing slower than the other children. He had been born premature and was about 9 months old when he started having bad seizures. He was cared for at the Shawnee Mission Infant Development Center and that’s when we found out that he would have a mental delay his entire life.

This was just the beginning of a lifelong journey that this couple, and many like them, faces every day. Parents of children with special needs face complex financial issues on top of the physical and emotional stress of caring for their dependent, their family and themselves. By developing both a financial and estate plan early, you may be able to alleviate some of the financial stress and focus on enhancing the livelihood of you and your family.

1. Understand Your Prognosis and Its Impact on Your Financial Needs

I have found that many families with comfortable financial resources will try to take most, if not all, of the extra costs needed to care for their child upon themselves. This is not uncommon. It is exactly what I did with my daughter’s care. While this may be sustainable for a period of time, many parents find themselves in a financial bind as a result of taking these expenses upon themselves. By understanding your child’s prognosis, you may have a better idea of the impact it could have on your finances. Will your child need help with housing, transportation, jobs or institutional guardians in the future? If your child only has a slight need that can easily be met, you may be able to take on some of the costs. However, if your child’s need will be lifelong, being aggressive in finding outside resources early (as resources may become scarce as needs increase) is a good plan to ensure you maintain your financial health.

2. Establish Your Estate Plan

If you were to pass away without an estate plan and/or other legal protections in place, your child could become the beneficiary of the inheritance, an action which could make them ineligible to receive government assistance and compromise their future well-being. This could also happen if specific assets are left to children with special needs or if you designate your child as a beneficiary on any financial accounts or insurance policies. One option for protecting your child in the event of your death would be to create a Special Needs Trust (SNT) which would be the beneficiary of the inheritance and appointing a Trustee who understands the rules of SNTs to control the distribution of money upon your death. Although language governing SNTs vary from state to state, the SNT is usually only used to supplement any government aid your child may receive, not to be the primary means of support for the child.

3. Inform Family Members of their Potential Financial Impact

Just as you may compromise your child’s financial wellbeing by leaving them assets in their name, your family members could do the same. Let family members (especially grandparents) know the rules of gifting or inheritance and how they impact your child. You may suggest they leave any monetary help to the trust so that it can be appropriately distributed by the Trustee.

Keeping an eye toward the future and having a plan to cover your child’s life span may help alleviate many of your financial worries. Remember, when you have a child with special needs, your financial planning and estate planning really covers two generations – getting you through your life and retirement, and making sure your child is covered for the same. Feel free to contact me if you need help building financial security for your child with special needs or would like an introduction to resources we have found helpful.

Michael J. Searcy, ChFC, CFP®, AIFA®, is president of Searcy Financial Services Inc., a registered investment advisory and financial planning firm located in Overland Park. For additional information, visit SearcyFinancial.com or call 913.814.3800.