Guide to Planning for a Child with Special Needs

When you’re the parent of a child with special needs, there’s a lot that’s needed from you: love,

patience, and perseverance. However, something that many people often forget is the financial implications that accompany this family dynamic. To put this in perspective, consider that it traditionally costs an American family an estimated $233,610 to raise a child to age 17, according to the U.S. Department of Agriculture. Meanwhile, supporting a child with autism or an intellectual disability can cost anywhere between $1.4 to $2.4 million. That’s nearly 5 to 10 times as much!

If you’re in this situation, it's important to recognize that you’re not alone. Every year, more and more resources are being made available to households of children with special needs. Here are a few of the tools and actions you can take to ensure that your loved ones are financially supported - both now and in the future.

Determine Your Specific Needs

First things first, it's important to recognize that not all special needs cases are the same. Sometimes children with disabilities grow up to be relatively self-sufficient and maintain full-time jobs. Others may have a more severe condition that requires full-time care and supervision. As a parent, only you know the intensity of your family’s situation. This is why when planning for the future, it's critical to be honest with yourself and see your child’s condition for what it is and plan accordingly. Be sure to also include your partner in the conversation as well as any advice from your child’s primary care physician.

Some important points to reflect on:

● What schools can our child attend? Which ones are best suited to their needs?

● Are modifications to our home or vehicle necessary?

● Do we require any special equipment?

● Will we require at-home support from a care provider?

● Do we need the assistance of external services?

As you’re thinking about each of these topics, try to estimate what the financial impact will be - one year, ten years, or even thirty years from now. I know this can be a lot to digest at once. However, the more you can get in front of these challenges now, the better prepared you’ll be for handling them in the future.

Open an ABLE Account

As we already mentioned, the financial burden of raising a child with special needs can be quite challenging. For this reason, the government allows qualified families to participate in what’s called an ABLE account. Born from the Achieving a Better Life Experience (ABLE) Act of 2014, ABLE accounts (or 529A ABLE accounts as they’re also called) are state-sponsored tax-sheltered investment plans. The way they work are as follows:

● Families make contributions to the plan

● Those contributions get invested and grow exempt from federal taxes

● Tax-free withdrawals are made on qualified disability expenses

Contributions to ABLE accounts are limited to $18,000 in 2024 - the federal gift tax exclusion amount. However, additional funds can be contributed if the beneficiary works and does not contribute to an employer-sponsored retirement plan such as a 401(k). California’s version of this plan is called a CalABLE account. Not only do CalABLE accounts have low starting deposit minimums ($25) and offer eight different types of investment options, but they've also recently passed new legislation that raises the eligibility age cap, changing the onset of disability age cap from age 26 to age 46. This new limit starts in 2026.

Utilize Available Government Programs

ABLE accounts aren’t the only way for families with special needs children to catch a break. Several government-sponsored programs are also available to help ease the financial burden. At the federal level, these include:

● Supplemental Security Income (SSI)

● Temporary Assistance for Needy Families (TANF)

● Supplemental Nutrition Assistance Program (SNAP)

● Medicaid

● Children’s Health Insurance Program (CHIP)

Specifically for residents of California, there are also several state-sponsored benefits. For example, In-Home Supportive Services (IHSS) helps pay for the at-home care of children with disabilities instead of taking them to an external provider. There are also special educational grants such as the Family Empowerment Centers on Disability Grant. Finally, the Department of Developmental Services has several regional centers throughout California. Regional centers are nonprofit private corporations that provide or coordinate services and support for individuals with developmental disabilities. This includes everything from diagnosis and counseling to providing care rights advocacy. Most services and support are free regardless of age or income.

Prepare Your Child for Independence

As parents, it has often been said that the greatest gift we can give our children is to help them become independent. This is just as true for those with special needs as it is for everyone else. From a young age, parents can help their children to develop independence by actively helping them learn important life skills such as:

● Good personal hygiene

● How to use money and pay for things at the store

● Practicing good manners in public

● How to talk to people they’re not already familiar with

● Safely using transportation

As your children mature, there can also be a lot of benefits to seeking employment. A job can provide them with a source of income as well as a personal sense of responsibility. Additionally, it may also provide a healthy social outlet for making friends, meeting new people, and learning good skills. Of course, the job should be matched to align with your child's capacity. A good place to start is with AbilityOne.gov - a federal website that helps people who are blind or have significant disabilities find jobs with nonprofit agencies nationwide.

There are also plenty of state-sponsored resources too. California residents who need help finding a job can utilize the AJCC (America’s Job Center of California). Not only can they connect job seekers with disabilities to a pool of potential employers, but they can also provide them with additional support to become better qualified for employment.

Purchase Life Insurance

It’s not a pleasant thought, but there will come a day when you won’t be here to care for your child. Whether it's by accident or if they hopefully outlive you, you’re going to want them to continue to be properly financially supported. This can be accomplished by purchasing life insurance. Even if you’re already covered by a group life policy through your employer, you’re still going to want a private policy. When considering life insurance, there are generally two main routes:

● Term - Anyone looking for an immediate, affordable option will like term life. Term policies can be purchased for 5 to even 40 years. However, they do eventually expire, and you can almost certainly count on them costing significantly more if you wish to renew at the end of the term.

● Permanent - Permanent policies such as whole or universal life are designed to never expire. They do cost more than term life; however, they also have a cash component that has the power to build value over time and are designed to be with you throughout your entire life.

Even though the general rule of thumb for life insurance is 10-12 times your income, you should definitely talk with your financial advisor about what amount and type of coverage you should have for your family's specific situation.

Prepare Your Estate Planning Documents

Life insurance is a good start to ensuring your child’s financial security when you’re no longer here. However, if your child ever did receive the death benefit from your policy, who would manage it? How would they make sure it's used appropriately for the support your child requires? In most cases, this can be solved using a trust. A trust is a special estate planning document that’s used to help safely and legally transfer assets from a person’s estate outside the probate process. While revocable living trusts are a popular option, a special needs trust or SNT may be a better solution for families of children with disabilities. This particular type of trust allows you to save and invest contributions on behalf of your child. The advantage of an SNT is that it won’t count towards their personal income, and this should help them to continue to qualify for government benefits. You can initiate an SNT yourself or take part in a pooled trust. These types of trusts are SNTs that are administered by nonprofit organizations and "pool" together funds from multiple special needs families as well as other donors and community members. The nonprofit then appoints a trustee who acts on behalf of each beneficiary (i.e. your child).

While SNTs work to serve a niche purpose, they do have their potential drawbacks. For starters, the funds should not go toward the food and housing of the person with a disability because this could result in the reduction or loss of their SSI benefits. The funds may also be subject to payback Medicaid upon the passing of the beneficiary. Consider these points carefully before choosing the type of trust that’s right for your family. Finally, no good estate plan is ever complete without a will. Formally called a “last will and testament”, this legal document helps communicate your last wishes to the courts. When done correctly, a will and trust should work together hand in hand to ensure your child will be in good hands.

The Bottom Line

There’s no doubt about it - Supporting a child with special needs can be financially challenging. However, with some preparation and by tapping into available resources, you can structure a plan that will provide years of support for your family for years to come. If you’re ever in need of financial advice, please contact the knowledgeable team at LA Wealth Management. We’ve handled all types of situations, including those of clients with special needs children and we’d be happy to discuss your unique situation.