Financial planning for families with a disabled child

Financial Planning

Key takeaways

  • The direct and indirect costs of caring for a child with a disability can be substantial and include medical care, special education, in-home care, and a decrease in household income.
  • As part of your financial plan, it may be beneficial to consider specialized estate planning, and specifically a Special Needs Trust, to leave assets to your child while also allowing them to continue qualifying for outside assistance.

Children with disabilities require special care, and the cost of that care can add up fast. What’s more, traditional financial planning approaches may trigger unintended funding and tax issues. Following are some of the unique costs families with disabled children may encounter — and financial strategies that can help along the way.

The high cost of living with disability

At any given time, almost nine million families in America are caring for a child with disabilities1 and feeling the financial squeeze. While the costs associated with a disability vary depending on the type and severity, many conditions incur high costs that families feel unprepared to handle.

For example, the average cost of autism is $60,000 a year through childhood.2 The average lifetime cost for an individual with cerebral palsy (CP) can top $1 million.3

Even if your child’s needs aren’t as expensive as those with autism or CP, the costs can be substantial. In addition to direct medical costs, a portion of which may be covered by insurance, there can be numerous indirect costs, including:

  • Modifications to your home
  • Special education
  • In-home caregivers
  • Help with housekeeping
  • Decrease in your household income in order to care for your family

For more severe medical conditions, it may be necessary to place the child in a nursing home or residential treatment center.

Five considerations for financial planning

While government assistance often covers basic care, many families want to supplement that basic care to ensure their child has everything they need to thrive. Here are five steps to help you plan.

1. Understand needs and existing resources

Take an inventory of the access you have to equipment or home accommodations that you and your child will need. Consider what potential government assistance you and your family may be eligible for, based on income and the nature of your child’s disability.

Most U.S. counties administer their respective state’s services; at the state level there is also a Medicaid program for health insurance and Social Security disability. It’s important to take stock of what options may be available to you while also identifying what additional care you want to provide for your child that will not be covered.

2. Plan for school-aged children to thrive in an educational environment

As your child grows up, you may need to consider different costs of education at different points in their life. What educational environment will help your child thrive, and are there additional costs that may accompany that? Will they need additional care within that educational environment, or after-school activities and care?

3. Consider the financial needs of your other children

It’s understandable to give extra attention and focus to a disabled child. But if you have other children, make sure your financial planning takes them into account, too. Consider ways you can help them prepare for their financial future, and potentially discuss ways they may be called on to help their sibling now and in the future. The more open conversations a family can have around financial planning and family expectations, the better.

4. Prepare for adulthood

It’s never too early to plan for your child’s journey into adulthood, so start envisioning what it will look like as soon as you can.

Is your child interested in, and able to attain, post-secondary education? Will they be able to work and earn a supplementary income? Will your child be able to live independently? If not, what types of living arrangements are available? Consider what estate planning you already have in place, such as a will or trust, for when you are no longer around to care for your child.

While government assistance often covers basic care, many families want to supplement that basic care to ensure their child has everything they need to thrive.

Consulting with a professional well-versed in special needs estate planning can also help you avoid potentially costly mistakes. They can also introduce you to programs like ABLE (Achieving a Better Life Experience), which offers tax-advantaged savings accounts to fund disability expenses.

5. Consider a Special Needs Trust (SNT)

Becoming the beneficiary of your assets can disqualify your child from receiving future assistance from government programs like Medicaid and Supplemental Security Income (SSI). The threshold is extremely low: as little as $2,000, or less, in your child’s name is disqualifying, depending on your state’s requirements.

Instead, parents can establish a Special Needs Trust (SNT) and leave their assets to the trust. That way, the child can benefit and still qualify for outside assistance. Parents of children with disabilities should also notify family members once the SNT is established. Keeping others aware of the SNT and its purpose can help everyone plan more efficiently — and any assets people may have planned to leave to your child can be left to the SNT instead.

When you understand the costs associated with raising a disabled child — and how to navigate them — you can plan a brighter financial future for the people you love.

Learn more about trust and estate services from U.S. Bank.