About the Author
David Fulton is a Colorado Springs, CO fee-only financial planner providing Hourly and On-Going Financial Planning and Investment Management. While he works with a broad range of clients, David specializes in working with Active and Retired Military, Federal Employees, and Families with Special Needs Children.
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There are several distinct phases families with a special needs child will transit throughout their lifetime. The first being the birth of their child until that child qualifies for school age services at 3 years of age. If you are new to Special Needs parenting, this will serve as a primer on many of the areas you should further explore. If you are a special needs veteran, let us know your experiences and check back later as we address a life phase that may be more appropriate for your situation.
When my son Hugh was first diagnosed with Dravet Syndrome before his first birthday I couldn’t imagine what life would be like for us. I didn’t even fully know the hell that Dravet would unleash on my poor boy, but I quickly got an idea from reading every piece of medical literature I could find on the internet. Our neurologist gave me a photocopied study from one of his medical texts outlining the many damaging effects that Dravet would introduce. Words like, rare, catastrophic, high mortality, drug-resistant, limited treatment options, all hammered my brain and my heart. I remember sobbing deeply and uncontrollably as I envisioned a short and brutish life for my beautiful son.
But the next day arrived and Hugh was still the same cute and charismatic child he was the day before. At that moment, I knew that life had forever changed, but it certainly wasn’t over. We dug into our faith and each other and set our jaw determined to give Hugh every advantage we could. Life with Dravet would be limiting, but it didn’t have to be limited.
Every child is unique, as is every parent. Perhaps you were like me and immediately sought out ways to fix what was broken…a typical response. Or maybe you are like my wife and suffer long and perpetual grief coupled with the constant tearing and opening of wounds associated with living with a special needs child. I suspect you have shared an urge to sucker punch someone who in an attempt to provide hope, made it about themselves sharing stories about people they have known and their afflictions; or worse yet, compared your child to a dog they knew who once had seizures! (True story!)
Let’s face it, we stink at communicating in the face of grief. That part became clear to me as I watched a young colleague and his wife suffer greatly as their daughter was born with many birth defects. We quickly went from the comforted, to the comforter. It was a difficult and awkward transition, but one that provided much insight and helped us acknowledge that we don’t have an exclusive corner on misery.
So give everyone a little bit of grace; they can’t possibly know how you feel. It is quite normal to feel overwhelmed by the day-to-day requirements and crisis that inevitable assail you each day. There are so many unknowns and variables at these early stages that it may seem paralyzing to think about the future. I challenge you to look forward and not backwards. As an advocate for your child you can make a difference in their development. Knowing what resources are out there is the first step. This early period in your child’s life, you have a great opportunity to set a foundation for education, relationships, and finances that will sustain you for years to come.
In the early years you will likely be inundated with medical requirements and specialty care. It is only after you get through the triage stage can you really begin to focus on how to start shaping your child’s development. You may be introduced to therapy if your child has developmental needs. Lots of therapy. Occupational therapy, physical therapy, speech therapy, to name a few. The costs of daily or weekly therapy sessions can be quite burdensome.
Fortunately we live in a generous society. Unfortunately, the level of generosity is uneven and often varies by state. This will be your first exposure to the challenges of government benefits. As a result, you should likely come away with a healthy skepticism that the government is capable and responsible for looking after your child. As a result, during this stage you will need to begin learning how to advocate for your child’s needs and begin looking into the future on how to save for a lifetime of required care.
The early years of your child’s life, he or she will typically qualify for Early Intervention (EI) services. EI provides developmental supports and services to children from birth through three years of age who have special developmental needs. It can help improve a child’s ability to develop and learn. It can also help parents and family members learn ways to support and promote a child’s development. EI is a Godsend for most families and gaining access to therapy early in a child’s life can pay tremendous dividends. If your child is younger than age 3, you generally want to contact the state’s EI services office. You can find your state’s office here. A child in this age range receives a free evaluation under the Individuals with Disabilities Education Act (IDEA).
Relationships with your family, your friends, your neighbors, and especially your spouse are incredibly important for special needs families. Friendship can be an emotional train wreck between parents with a special needs child and parents of children without disabilities. You may experience a confusing reaction of both joy and sadness when friends and family members discuss their own children’s accomplishments. Conversely, parents of typical children often don’t know what to say to a parent of a child with special needs, as a result they usually say nothing at all. My wife and I have often wondered how we still have friends, when it seems that our entire world is so abnormal.
Here’s the thing. You have to work hard in any relationship. You have to work even harder as a special needs parent. Your network will be your saving grace in the face of adversity. Don’t let despair color over your relationships. As Karen Wang rightly points out, reciprocity is the “basest of elements of the social contract”. Relationships are two-way streets, and you need to figure out how you can give and not just take. In the early years fight to keep your relationships. Figure out a way to pour into others even when it seems there is nothing left to give.
Why are relationships so important? Because being a caregiver takes a toll on your physical and mental health. A study in 2005 reported that 60 percent of the family caregivers surveyed, said they had “fair or poor” health, compared with only 33 percent of non-caregivers. The physical, emotional and economic burdens on special needs families can frequently become overwhelming without some form of personal support. Constant caregiving can be a highly demanding and stressful responsibility, and no one is equipped to do it without some help.
Your network will help you through. For those who do not have a strong personal network, or fear burdening their friends and family, respite care becomes an important outlet. Respite care provides special needs parents the opportunity for a temporary rest from their caregiving duties.
Families will likely incur extra expenses for respite care. A home care aide averages $21 per hour, while a person who just performs housekeeping charges an average $19 an hour. Short-term respite care normally means two to four hours and many caregivers charge a minimum number of hours to make it worth their time.
Insurance usually only covers respite care if the care providers are licensed medical professionals such as nurses, dietitians or other specialists. State Agencies often have funds that help qualified family members receive payment for respite services (source). Most states also offer some kind of coverage through Medicaid and many states have waivers that can offset some of the costs. Generally these programs are known as 1915 (c) Home and Community-Based Waivers. The ARCH National Respite Network and Resource Center provides a compilation of state funding information.
Special Needs Families are often like 66% of American families and may be challenged to properly budget. According to the 2010 Disability Status Report, families with a disability earn approximately $22,600 less than their peers and have the highest poverty rate at 32%. So take the costs of raising a child, add-on a lifetime of additional requirements and you have a significant challenge ahead.
Caring for a child with special needs can be a time-intensive task, and you or your spouse may be required to reduce the number of hours you’re working to care for your child. This loss of income has both an economic impact in terms of a reduced assets and personal impact for the spouse who is now staying home full-time with limited opportunities for expression and interaction. If you and your partner will both return to work, you’ll need to find a viable specialized daycare service that can cater to the needs of your child, or hire in a nanny or au pair.
Additionally, all sorts of new costs and expenses are likely to be introduced during this phase. Depending on their condition, your child will likely require routine checkups and examinations from medical specialists, and may occasionally need to spend the night under supervised hospital care. Over-the-counter medications and mobility aids could also be a significant expense.
Budgeting becomes a critical tool to ensure financial stability during this phase. If you start off in a hole, it is difficult to climb out. You should get a good budgeting tool so you can take stock of where you are today and identify fixed and variable expenses. You will need to clearly define your savings goals so that you are focused and judicious in the use of your available resources. To do so you must ensure every dollar has a purpose and put it on auto whenever feasible. You will have to work hard to keep your debts minimized and build towards an emergency fund so that for each unexpected expense, your fiscal life is not put in jeopardy.
Your ability to achieve financial stability is proportional with your ability to live within your means, manage your debt, and increase your capacity to save. It is often a good idea to seek help during this phase from a financial planner who specializes in special needs. Getting the foundation right, as early as possible will help prevent the chaos that special needs unleashes on our fiscal lives.
While dealing with the state and federal government can be soul crushing, there are several advantages for your child in doing so. As an advocate, you need to steel yourself for what is almost always a fight for resources. Be willing to battle until get what your family needs. Awareness is your biggest challenge in this phase. Knowing what is out there and what you qualify for is half the battle for newly diagnosed families.
There are generally three types of government benefits you may qualify for during this phase. Most children and adults with developmental disabilities qualify for Social Security. Supplemental Security Income (SSI) is a component of Social Security and is a needs-based government-funded program to help people who have a long-term disability that prevents them from financially supporting themselves. Payments are issued monthly and are based on the federal benefit rate, which in 2018 was $750 a month for individuals. This rate may be supplemented by some states. Prior to a child turning 18, eligibility of benefits is based upon the parent’s income and assets which make it difficult to attain for many. As a result the parent’s income level will often disqualify your child’s eligibility for SSI. Although your child may not qualify for SSI now, you should be taking the steps to maintain eligibility when they turn 18 and their income, not yours, drives eligibility. You do so by setting the foundation now with proper estate planning documents.
The second benefit your child may qualify for is Medicare and Medicaid. Medicare is a government program that provides health care benefits to senior citizens, disabled individuals. Medicaid is a joint federal and state program that helps with the medical costs for people with low incomes and limited resources. Medicaid-eligible individuals with disabilities are entitled to all medically necessary services. Individual states establish and administer their own Medicaid programs. Like SSI, Medicaid eligibility is based on the parent’s income. For children with disabilities the parent’s income must be below 185 percent of the federal poverty level ($46,435 for a family of 4) or are already qualified to receive SSI.
Because many middle class families earn too much income to qualify for Medicaid, most states have State Waiver Programs designed to prevent families from going destitute. Medicaid Waivers help provide services to people who would otherwise require long-term care in a treatment facility if on their own like those with severe intellectual disabilities, developmental disabilities, and autism. State Waiver programs help maintain insurability through Medicaid and often provides other important benefits like respite care. Many people who qualify for waiver services are not even aware that they exist. However, the waiting period to get onto a waiver program, can be many years, and varies by state so it is important to apply for access early.
One of the toughest challenges facing parents is how to equitably divide estate assets among children and how to protect a special needs child without leaving the other children wanting. Parents may often decide an equal split between all the children is the fairest solution, but doing so could leave a special needs child without adequate means later in life to pay for expenses. On the other hand, some believe that government programs may cover much of the cost of care for some special needs children, and there is no need to leave a large sum. Personally, I am uncomfortable with the notion that the government should be solely responsible for taking care of my special needs child. We continue to see political pressure to reign in government overspending and our special needs community often does not have the most powerful voice. As a result it is prudent for parents to figure out how they will help fund their child’s future.
Savings and Gifts
As it pertains to savings and gifts, do not establish savings or investment accounts in your child’s name. During this phase you should be saving in the name of the parent(s) and earmark it for your child. Failure to do so may impact your child’s qualification for government benefits. Any income (to include gifts) of $2000 will reduce their benefits. Most importantly, once you have developed your savings strategy, you should communicate it with your friends and extended family, so a well-meaning relative does not accidentally leave money to your child through their estate. You need to have a very frank conversation with your family about the impact of gift giving. Many grandparents want to help, but generosity can become a nightmare if not properly planned for.
If you are wanting to get ahead of the savings game and take advantage of compound interest, it is advised to go ahead and open an ABLE account in your child’s name. An ABLE account lets a designated beneficiary save up to $100,000 in assets without impacting disability benefits, and is allowed to grow to $300k-$400k in most states. The funds in these accounts can be used for education, transportation, legal fees and quality-of-life purchases. While there is no tax deduction for contributions, money withdrawn from the account is tax-free so long as it is used for qualified expenses. Trusts are the less restrictive option, but ABLE accounts are inexpensive and don’t require a lawyer to set up. For more on ABLE accounts you may want to check out a previous post on the topic.
If you have the means or have adequate set aside money, you could establish a Special Needs Trust (SNT). A special needs trust is a trust tailored to a person with special needs that is designed to manage assets for that person's benefit while not compromising access to government benefits. There are three main types of special needs trusts: the first-party trust, the third-party trust, and the pooled trust. All three name the person with special needs as the beneficiary. The details of a SNT are beyond the scope of this post. I recommend you read this post from Special Needs Answers on the subject.
Lastly, during this early phase, parents should begin to formulate a Letter of Intent. A Letter of Intent (LOI) contains information about how you want your loved one to be cared for when you are unable to. It documents your life, financial and legal plans. But it is even more than that. If your child or loved one ever needs care that won’t be personally given by yourself or your spouse, you have the right as their parental guardian to ensure that the assistance they receive aligns with the standard of care you strive for. This letter is meant to detail your expectations when it comes to caring for your child. Failure to leave instructions will only ensure your child’s life falls apart faster than anyone can figure out how to help. You are their voice. When you are gone, your LOI is your voice. It’s not legally binding and doesn’t replace a trust, but a letter of intent can share information on how parents hope their assets will be used and who will care for their child.
During this phase there is not a lot for you to do with respect to your retirement accounts. I would encourage you to keep up with your retirement savings even in the face of increased costs. You simply cannot make up for lost interest earnings the longer you wait to save. However, there is one step you need to take immediately with respect to your retirement accounts; you should update your beneficiary designations.
Because SSI and Medicaid have asset and income limitations, leaving retirement funds directly to a person receiving these benefits will almost always disqualify the beneficiary from receiving SSI and Medicaid. Do not name your special needs child directly as a beneficiary.
It is important to remember that retirement benefits are not controlled by your will. Rather, their disposition is controlled by the beneficiary form you filled out in association with the retirement plan. Parents may have created a will and a special needs trust for their special needs child but neglect to revise their beneficiary designations so that the child’s share goes to a special needs trust.
Your need for life insurance is the greatest during this phase, as you will likely have many expenses and fewer assets. Using life insurance benefits is a common way parents plan to pay for their child’s ongoing care. You should spend some time calculating your insurance needs. Many people underestimate how much it will cost to replace an annual income in addition to funding other requirements like medical costs and education for a special needs child.
Much like your retirement accounts, if you currently have life insurance you will want to ensure the beneficiary designations are updated and current as it’s a mistake to have the child named as a beneficiary for the same reasons as your other accounts. Instead make sure a special needs trust receives the money to prevent an interruption in government benefits.
For families with a special needs child, life insurance has become a common answer to the question of how to fund a SNT. A life insurance policy can provide a special needs family with the comfort of knowing that even if there are financial setbacks in the future, or one or both parents die early, or their accumulation of wealth is shortchanged, there will still be money in the future for their child. Additionally, parents don’t need to worry about spending their retirement on themselves, or on what will happen to their child if they require long-term care and drain their savings. They are free to direct their remaining estate and assets to their other children or to leave a larger share for the special needs child and smaller shares for his or her siblings. I wrote previously about using Life Insurance as a funding vehicle for a Special Needs Trust, you may want to check it out.
Long-Term Disability Insurance
Statistics show that one in four can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age. Because special needs families are often forced to subsist on one income, there is an increased danger if the primary breadwinner gets sick or injured during this phase. Your spouse may likely have reduced work hours, or given up career to care for your special needs child and you may have become a sole income household. You need to have a source of income in the face of adversity; disability insurance provides that income stream.
So your journey is just beginning. I am sorry your life has been flipped upside down, but the very fact that you found this blog and have read this post to the end tells me you are the type of person who is up to the task. Remember, there are many of us who are journeying along side you. Sharing what you learn along the way can be cathartic for you, and intensely helpful for the rest of us. Good luck!