Mo Vidwans
Raising a child is, to start with, a monumental task, as all parents would readily attest. If we have to look after a child who needs some special assistance, the tasks get even more complicated. Physical and mental stress for sure, but also financial stress too and this is, at times, despite having health insurance. Getting the child assessed to qualify for support programs, fighting for benefits and finding appropriate therapists amongst many other tasks, can become a fulltime job, one that can easily rack up tremendous costs. It is an ongoing journey, and we are in it usually for life. During my yearly tax volunteer work that I do, I come across mothers who are in their 70s and are taking care of a disabled child of 50+ and they don’t have much money to show either. Think about that situation for a while. Their biggest worry is, as expressed often by them, what would happen when they are not around to take care of the child.
That is indeed the top concern amongst the surveys of special-need families. According to Census Bureau data, about 10 percent of children under 18 -about 7.5 million- have a severe disability. A survey done by American College of Financial Services found that 70 percent of special needs families were worried that they would have to compromise retirement to care for a loved one with special needs. This becomes a double whammy for most; they will be short on their retirement funds, and they will have to take care of the person when they are physically not able to.
When there is a special needs child, the financial planning aspect takes a different turn altogether because the conventional financial planning takes a backseat or at least it will extend well beyond the traditional plans of the parents. Now the planning does not stop at the time of their own demise but gets extended 30 or 40 years beyond that timeframe. The estimates of costs can leave anyone with a sticker shock. The lifetime costs for a person with autism averages around $2 million depending on the severity of autism. According to Autism Speaks, an advocacy group, someone who needs 24/7 residential care can easily pay $100,000 a year. Even those who don’t need intensive support can incur a mountain of out-of-pocket costs. Even if one has the best health insurance, there are still limits as to how far they will keep on supporting such efforts.
When thinking about the costs and future plans, the focus shouldn’t be just on the diagnosis but rather also on child’s functional ability. This medical assessment is often the first tiny step towards getting the benefits. Needless to say, benefits vary by state; through Medicaid as well as other agencies they may have programs such as developmental disability and autism etc. How much benefit is clearly defined by age and 18 is the magic threshold. Before the child turns 18 parents’ income and assets are counted in most aid calculations but families can apply for Medicaid waivers as long as the child does not have more than $2,000 in assets in his/her name. How much and which benefit varies largely by the State laws. The benefits can fund care-giver services, home modification and equipment not covered by insurance (up to $10,000). The largest benefit is to defer the cost of custodial or home care.
Which state you live in does matter with Medicaid waivers more likely in Northern states than in the South. Suddenly parents’ decision as to the place of retirement is somewhat dictated by the dependent child.
When the child crosses 18, he/she is eligible for supplemental security insurance (SSI) based on the level of their disability. Again, the total assets of the child must be under $2,000. If the beneficiary inherits or even gets a job, it could conceivably disqualify them from the state assistance. One way to avoid this is through what is known as ABLE account. It does help to investigate this but there are limitations on this, too.
A special needs Trust is an option used by many parents; these trusts can shelter assets. For example, not only parents, but grandparents and conceivably others who wish to bequeath money to a special needs child can add assets to such trusts. The same holds for life insurance policies that pay upon death of the parents to pay for child’s needs. It should be noted that these trusts are irrevocable; the money that goes in, cannot come out for any other purpose other than the child’s benefit and for the beneficiary of the trust after the child passes on. Trust assets do not get a step-up in basis in terms of taxes when they inherit it. The cost of setting up such a trust is high too. It should be noted here that selecting a successor guardian and preparing them for the task is critical; the focus in all this must be the special-needs individual and there should be some chemistry between the individual beneficiary and the guardian.
While taking care of the disabled child, the other siblings and the needs of the caretakers themselves (generally parents) get ignored, which could often be the case. It is wise to ascertain that much thought is given to those aspects and arrangements made in the Trust or otherwise to relieve the caretakers periodically and the other siblings too are well cared for and paid attention to. Not only as an equal right sibling of the disabled, but also for their emotional, scholastic and social growth needs.
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Mo Vidwans is an independent, board-certified financial planner. For details visit www.vidwansfinancial.com, call +1 (984) 888-0355 or write to [email protected].
