Special-needs families routinely face many challenges, whether emotional, physical or financial, that can drain precious energy and resources. On a daily basis, they must often try to absorb complex information on medical issues and treatment, health insurance and educational or work accommodations; tackle issues with transportation and living spaces, and juggle an array of appointments. The breadth of these challenges is daunting but becomes more manageable with the help of a knowledgeable financial planner that can provide tools and resources for meeting the family’s financial challenges.
Many special-needs children have disabilities that require lifelong care. Financial planners can help families plan for medical care, therapy and caregiver costs as their children grow and ensure their child’s needs are met in adulthood, as well. Having a financial advisor who understands not only the importance of goals-based financial planning, but also how to secure resources, monitor relevant regulation changes and make referrals is paramount. By providing holistic financial planning services, financial planners can help shoulder the work and worry, enabling families to focus on caring for their loved ones.
The Health Insurance Maze
Professional insurance advice is incredibly important to special-needs families and caregivers.
The high cost of health care hits parents of special needs children especially hard because the expenses continue indefinitely. Thankfully, there are government-supported programs that may provide assistance, allowing special-needs children access to less costly care. In some states and municipalities, sliding-scale or no-cost treatment options help kids manage a wide variety of conditions.
Government bureaucracy often creates additional stresses on already overwhelmed parents. Financial advisors with expertise in special-needs financial planning help clients navigate the maze of programs and qualification standards, starting with an overview of the system. Some also have information on private organizations and charities that offer assistance.
Though these programs provide tremendous relief, families still get hit with large expenses, such as the cost of a caregiver while parents are at work. In addition, many families realize that their child’s health and quality of life can be improved by supplementing government programs with private therapy. Few families can afford ongoing private therapy without insurance. Financial advisors understand the details of what plans cover and what insurance options are available. Having the right insurance for a special-needs child is invaluable because private therapy, such as speech or music therapy, can yield life-changing results.
A financial advisor can also help clients manage out-of-pocket expenses without having to resort to credit cards or other high-interest loans. For example, an analysis of the child’s needs and insurance coverage may make it apparent that the family will always reach their out-of-pocket maximum. Knowing this, a financial planner can help budget for this expense and, when dealing with clients who have significant assets, provide an investment plan that helps offset the costs.
Planning for the Long Term
Most special needs families have experienced sleepless nights, worrying about what will happen to their loved one when they are gone, and whether their loved one will continue to have access to needed care. In conjunction with estate planning professionals, financial planners can help allay these fears. The financial advisor can create a savings and investment plan that can help provide for the child’s future based on the family’s financial resources and objectives.
The child’s eligibility for Supplemental Security Income (SSI) and Medicaid in adulthood takes top priority for parents who may not have a large nest egg. Parents render their children ineligible for these programs if they leave the child a sum above $2,000. If the child has assets worth more than this, the child would have to run out of money to become eligible. For this reason, financial advisors often caution their clients to not bequeath money in a will but instead create a special-needs trust. To create the trust, parents need to hire an estate planning attorney and appoint a trustee, who will manage the funds and disburse them for the benefit of the child. Because the trustee controls the funds, the government does not consider the trust part of the child’s assets, so eligibility for SSI and Medicaid are unaffected.
Financial advisors can also help their clients with advice regarding life insurance policies to benefit loved ones with special needs. It’s likely that a large term policy is needed for a special needs child while he or she is growing up. During this period, it’s possible that the child will need additional therapy and incur other costs that need to be considered. Also, many physically disabled children require assistive devices that must be replaced frequently as they grow. The need for life insurance for a grown, special-needs individual depends greatly on the caregiver’s overall financial plan and their loved one’s future needs. A financial advisor provides great assistance in analyzing whether insurance policies are needed and in selecting the right amount of term and whole life insurance.
The ABLE Act Tax Break
Families of special-needs children face obstacles, roadblocks, red tape and hassles regularly. In an effort to alleviate the headaches around creating savings for disability-related expenses, the U.S. Congress passed the Achieving a Better Life Experience Act (ABLE Act) in 2014, which supports savings plans similar to health savings accounts or 529 plans. The accounts are limited to $100,000 and largely do not affect eligibility for SSI, Medicaid or other public benefits if transferred to the beneficiary in adulthood. Financial advisors can include ABLE Act account contributions in the family’s overall financial plan.
Parents of special-needs children face a myriad of challenges. They must balance work responsibilities with the need to help their child overcome limitations and achieve the best possible quality of life. For many, the financial burden becomes very heavy, making financial planning even more important. Meeting with a financial advisor who can help shoulder the burden of planning for special-needs children helps parents understand their options and feel a sense of control over their child’s future.
Andrea McGrew is the chief compliance/chief legal officer at USA Financial, a comprehensive financial services institution, focused on providing advisors with the tools required to make solid recommendations and to empower clients to make educated and informed financial decisions. For more information, go to www.usafinancial.com. She is also the host of Un-Niched, an original podcast aimed at supporting and promoting female financial advisers and investors.
Andrea is an investment adviser representative of, and securities are offered through, USA Financial Securities Corporation (Member FINRA/SIPC, a Registered Investment Adviser).