Nearly 54 million Americans cope with special needs and the rising associated expenses, according to the National Organization on Disability.  The U.S. Census Bureau reports that one in every 26 American families is raising a child with a disability.  When planning for your child’s future, don’t focus on the disability but rather on your child’s capabilities and their potential for independence.

Here are four important steps the parents of a child with special needs should follow:

1.   Protect Your Child’s Eligibility for Government Benefits

Be sure there are no assets listed in your child’s name that exceeds a total of $2,000.  Having any assets worth more than $2,000 would disqualify your special needs dependent from many federal and state assistance programs, such as Social Security and Medicaid.

Be sure any friends and family members know this legal tidbit as well.  If grandma wanted to leave an inheritance to your child or write a very generous check to help, this could put your child over that threshold and the government could freeze your child’s benefits.  They can bestow assets, but ask them to put it in your name not your child’s.

2.   Protect Your Child by Purchasing Life Insurance

Raising a child costs a lot of money.  Raising one with special needs typically requires a substantial amount more.  The average cost to raise a child from birth to age 18 is $240,000; for a special needs child those expenses can quadruple.  The parent of a child with special needs spends an average of $330 per month1 out-of-pocket just on medical expenses.  Who is going to pay for these expenses if you die prematurely?  You need to have a plan in place to make sure your loved one is taken care of when you are not able to do so any longer.

If you are a single parent raising a child with special needs, you need life insurance.  If you are part of a couple raising a child with special needs, you both need life insurance.  When the time comes to list your policy beneficiaries, do not name your special needs loved one.  Life insurance proceeds would be included in your child’s assets and would disqualify them from government assistance since it most likely would put them over the $2000 limit.

Work with an attorney to set up a Special Needs Trust.  Instead of naming your loved one as the beneficiary of your life insurance policy, name the trust as the beneficiary.  With a special needs trust in place, money can be designated to enhance your loved one’s quality of life while still allowing them to receive government assistance.  With a trust in place, friends and family can choose to leave money for your special needs child by naming the trust as the recipient.

3.   Create a Will

When caring for a child with special needs, it is extremely important to craft a will that states who would be the legal guardian of your loved one should you die.  It would be up to the state to decide who should care for your child if there is no will in place.  It is recommended that you hire a lawyer who works specifically for people with special needs and is aware of your state’s disability laws to create the document.

Be sure to state in your will that your special needs child is not the heir of your estate, but that the special needs trust is.  Without a will in place, laws in many states will, by default, make your child your heir2.  Again, this would disqualify them from government programs.

4.   Don’t Postpone Planning For Your Own Future

You need to plan for the fact that when you are of retirement age, you still may be caring for your special needs child.  It’s time to budget and think through the next 10, 20, 30 years.  You may have to effectively plan for two generations.

When your child turns 18, the government considers them a legal adult.  Depending on your child’s disability, you may need to be appointed legal guardian of your adult child if he/she will not be able to make decisions about their medical treatments and finances.  If your child can be considered competent at times, then having him /her name you as durable power of attorney may be the easiest route for your loved one.

Prudential Insurance Company has come up with questions that the caretakers of loved ones with special needs need to consider:

1.   What is the nature and extent of the individual’s disability and what is his or her prognosis? To what degree can he or she care for him or herself, both now and in the future?

2.   What are his or her education and vocational goals?

3.   What is his or her current educational and/or employment status? Will it continue, or might there be significant changes in the near future?

4.   What is the current financial status of the caregivers, the loved one with special needs, and other family members? Is there a possibility of an inheritance? From whom? Is that person involved in the planning process?

5.   Is there a possibility that the individual with special needs might receive a sum of money from a personal injury claim, a life insurance benefit, or any other source? If so, when? If so, have appropriate trust arrangements been made so that these assets are not owned directly by the individual?

6.   Does he or she qualify for government benefits? If so, is that need thought to be permanent? If not, for how long is the qualification expected to continue?

7.   Is there a specific income that is being targeted?

8.   What is his or her legal capacity? Is there a need for a guardianship either now or in the future? Until what age will the guardianship be needed?

9.   Does he or she need assistance with financial management? Can he or she handle finances in either large or small amounts?

10.   Will there be a need for additional funds to provide for his or her needs at the death or disability of the parents?

11.   At the death or disability of the parents, who can substitute for them? What if no family member is able to do so or later decides not to for whatever reason?

12.   Where will he or she live in case he or she is not able, or does not want, to live at home? In that case, what additional costs are involved and what will be the source of that funding?

13.   How will his or her financial needs following the death of the parents affect the shares of the estate available to other children? How will that be dealt with and communicated to those children?

With these steps and questions in mind, don’t put off planning any longer.  It’s absolutely critical to plan ahead especially if you have a loved one with special needs.  Seek out qualified and experienced financial professionals and legal advisors to be sure everything is set up properly and that you aren’t missing out on any potential benefits.



(1) The financial side of raising a special needs child, The Journal News,, October 2015

(2) Avoid the Biggest Mistake of Financial Planning for Special Needs Kids, Daily Finance, September 2012


Related Posts:

Life Insurance for New Parents

Life Insurance for a Stay-at-Home Parent

What If You Died Tomorrow?

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