Raising a child is expensive, no question about it. According to a 2015 report by the United States Department of Agriculture, raising a child from birth to age 17 costs upwards of $230,000 on average, and that’s not even including college education. This can be difficult for any parent, but add health issues to the mix and it gets even dicier. Caring for a child with autism or an intellectual disability can come with a lifetime cost of $1.4 to $2.4 million, according to Autism Speaks.
Navigating the labyrinthine systems of finance, health care, and government assistance on top of your normal parental duties is a challenge, so we spoke to three financial experts at Special Needs Financial Planning who offered their advice for parents who have children with disabilities.
Financial Planning for Birth
Not many expecting parents know ahead of time if their child will be born with a disability. But if you do have that heads-up, you can prepare by “getting your financial house in order as best you can,” says Cynthia R. Haddad, CFP, co-founder and partner at Special Needs Financial Planning. This includes paying off credit card debt, contributing to your employer’s retirement plan, and building up an emergency fund (three to six months of living expenses is recommended). The emergency fund will especially come in handy if you’re not able to go back to work immediately.
Haddad also recommends getting life insurance, which provides a cash benefit to your loved ones upon your death. In particular, spousal life insurance (supplemental coverage for your partner) and long-term disability group insurance (coverage that protects loss of income in case of injury or illness) would be helpful to have.
Lastly, Alexandria Nadworny, CFP, a wealth advisor at the firm, emphasizes the importance of emotional preparation before birth. Your life may be a little different than expected, she says, so worrying about things like retirement and college education on top of the pregnancy could prove too stressful. Nadworny says, “What we often tell people is to simply go home and enjoy their new baby … Sometimes you can feel like you’re on your own planet when you have a child with a disability. Your life has completely changed. It really is helpful to talk to other families that are going through something similar.”
Financial Planning for Early Childhood
In the first few years of your child’s life, the scope of their disability will likely become clearer. Depending on the disability, your child may qualify for early intervention: special education for infants and toddlers. Early intervention services can include speech and language therapy, physical therapy, home health visits, and more. Taking advantage of this early on could mitigate developmental delays and the need for special education later in life, so we recommend consulting with your pediatrician to see if your child qualifies.
Families contending with special needs on top of daily child care and financial responsibilities may find it difficult to plan for the future. For those parents, John Nadworny, CFP, co-founder and partner at Special Needs Financial Planning, recommends keeping it simple. He suggests having a will, life insurance, and a special needs trust, which lets parents and family members save money for the child without affecting the child’s eligibility for Medicaid or Supplemental Security Income later on. A recipient of those programs can be made ineligible if they have more than $2,000 in assets to their name (via 529 savings accounts, bonds, UTMA accounts, etc.), so it’s important to consider what saving and investment vehicles are used.
“If someone can get along the first few years of their life [with a will, life insurance, and special needs trust], they’re covered,” Nadworny says. “Then they can start thinking about everything else.”
Financial Planning for Adolescence
In a child’s adolescence, parents may have a better handle on their child’s disability and the financial costs associated with it. They may start to look into what savings vehicles and government benefits are available to them.
One common savings vehicle is an ABLE account, a tax-advantaged account that allows family members to contribute funds to a child with disabilities. To be eligible for an account, the child must have a qualifying disability or be blind, and the condition has to have occurred before their 26th birthday. This may sound similar to the special needs trusts mentioned above, but there are some key differences. Generally, a special needs trust is more flexible, allowing for unlimited contributions (versus the $15,000 per year limit of an ABLE account, as of 2019) and future trust beneficiaries. Additionally, if an ABLE account’s value exceeds $100,000 (as of 2019), an individual can be disqualified from SSI benefits.
“Putting money into an ABLE account is pretty much locking it up for the benefit only of the child with disabilities,” John Nadworny says. Haddad agrees: “In many cases, it might be better to give the money directly to the parents to use for day-to-day stuff … not covered by insurance.”
In terms of government benefits, federal aid can be hard to come by, as it’s dependent on a family’s assets and income. It’s really only until age 18 that the person with disabilities can take advantage of the largest benefits, like Medicaid and SSI.
At the state level, John Nadworny recommends looking into premium assistance, a program offered by some states (such as New York, Florida, and Texas) where parents of children with special needs can receive reimbursements on health care expenses from Medicaid or CHIP (Children’s Health Insurance Program) if they have employer-sponsored health insurance.
Regardless of the situation, Haddad says, “Take care of mom and dad first. Make sure your financial security is on target to meet your own financial goals. Take care of yourself first and then start to save for the other [goals],” which can include an ABLE account or a joint investment account (without your child’s name on it, so as to not disqualify them for SSI).
Financial Planning for Age 18 and Beyond
Age 18 is an important milestone financially; it means that your child will age out of the school system soon. The maximum age for public education varies by state, but it tends to be between 20 and 22. Individuals with disabilities can also qualify for federal assistance, like SSI and Medicaid, at this point.
Last but not least, at age 18, your child is legally considered an adult. Depending on the severity of the disability, they may not be able to live independently, have a career outside of home, or make legal or financial decisions. However, this doesn’t mean that full guardianship is the answer.
Nowadays, there are alternatives to guardianship that parents can consider. Haddad says, “[Instead of] getting the courts in your life and getting guardianship, [you] could have power of attorney or health care proxy.”
Supported decision making is also becoming a more popular alternative to guardianship. Alexandria Nadworny says, “You can have multiple people involved in helping someone with their decision-making. Maybe one person specific for medical, one person specific for social, and so forth. Much more individualized than guardianship.”
John Nadworny adds, “[The idea is to not] take control of someone’s life away from them. That’s why it’s becoming much more difficult to prove that someone needs full guardianship. Individuals should have some decision-making [power] when they’re older and with what they want to do with their life. They should have input on that.”
ABLE National Resource Center
Academy of Special Needs Planners
Child Care Aware of America
National Association of Parents with Children in Special Education
Sibling Leadership Network
Special Needs Alliance