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Love that lasts: Estate planning tips for your child with special needs

Your child with special needs is truly special to you and your family — and you want your love, care and support to outlast you.

To make sure that happens, there are practical steps you can take.

Prepping for a secure financial future

According to the World Health Organization (WHO), more than 1 billion people live with some form of disability. And the number of people with a disability have increased dramatically.1

Many adults with a disability are living much longer. Take, for example, the life expectancy for someone with Down syndrome: it used to be 25 years in 1983; today it is 60 years old.2

However, many parents of children with an intellectual or developmental disability feel like they are not doing enough to prepare them for a future without them. Not having enough information or time in the day could be the reason why they feel the way they do.

We’re here to help.

Here’s how you can put your child on a path that leads to a secure future — with or without you in it.

5 action steps you can take now

As a parent, you can plan for your child’s future by taking action with these five steps:

  • Step 1: Choose your team of dedicated family members and professionals. Your attorney, social worker, and financial professional should understand fiduciary requirements, government benefits, tax laws — and any special concerns your family may have.
  • Step 2: Assess your needs. Set short- and long-term goals. Determine the amount of money you need and how much your loved one will need.
  • Step 3: Prepare and implement your strategy. Think about the lifestyle you want for your loved one, what it will cost, and the resources you will need to make it happen.
  • Step 4: Write down your vision. Write a Letter of Intent for future caregivers and trustees to direct them about your wishes.
  • Step 5: Go over these steps annually to review any health or benefit eligibility changes, a changed financial situation, the current financial team, a special needs trust, and any changes needed to meet your goals.

Set up a personalized estate plan

Your child might qualify for government programs such as Medicaid or Supplemental Security Income (SSI), which can total up to $841 a month for an individual and $1,261 a month for an eligible couple (in 2021).3 This money can be used for food and housing, among other things. 

However, there are strict income and asset limitations. For example, your child must have less than $2,000 in assets to qualify for SSI.2

It’s important you properly prepare a financial strategy so government benefits aren’t reduced — or stopped — when they’re supplemented with personal funds or a life insurance policy. You’ll want to talk to a financial professional to learn more.

Life insurance benefits

Speaking of life insurance, it can provide smart solutions for families with a special needs child.

For example, the death benefit provides income tax-free financial support, which can help your family to maintain your current lifestyle. A policy’s cash value can help with current and future costs of raising your child with special needs, and can grow tax-deferred.

Additional agreements are available to help enhance your policy and address your goals, such as providing for your own care. (You don’t want to forget about your financial needs as you grow older.)

Consider a special needs trust

If an excess amount of countable resources (such as Supplemental Security Income or Medicaid) disqualifies your child from receiving SSI benefits4, consider establishing a first party special needs trust (SNT). With these financial vehicles, keep these points in mind2:

  • There are no size limits.
  • Set up the SNT before your child turns 18, if possible. That way it’s there if and when your child qualifies for government benefits.
  • If your child receives SSI benefits, do not use the money in the SNT for food or housing.
  • Appoint a trustee.
  • Pair with an ABLE account (much like a 529 account used for college). (See below.)

Be sure to consult a financial professional

To identify and meet your financial needs and goals, consider working with an estate planning attorney and financial professional who can discuss with you these estate-planning tools:

  • Power of attorney (POA) is the person who has the legal right to handle your financial affairs if you’re unable to do so.
  • Living will is a legal document that provides direction regarding your health care in case you become incapacitated or terminally ill.
  • Trust is a legal document that directs the management and distribution of assets.
  • Letter of Intent gives detailed instructions to future caregivers and trustees after you die. These instructions should provide an overview of your child’s benefits, medical care, daily routines, education, and more.4
  • Special needs (first-party or third-party) trusts protect your child’s assets while allowing her or him to maintain eligibility for state or federal benefits. Most popular, third-party trusts are funded by family members of the beneficiary. First-party trusts, on the other hand, are established with the special needs person’s assets.5
  • ABLE Accounts6 are tax-advantaged savings accounts that let you save up to $15,000 a year7 for the 2021 tax year without losing government benefits. It also gives your child some autonomy, allowing him or her to withdraw a set amount of money to use for qualified expenses.2

Potential education and job resources

Every parent dreams that their child — with or without special needs — can reach his or her full potential. This includes education and finding a fulfilling job or career.

The 529 College Savings Plan lets families set aside money for a wide range of education expenses. (Note: Money from this account (up to $15,000 annually as of 2021) can be rolled over into an ABLE account until January 1, 2026.7 The money grows tax-free. To be sure your child’s SSI benefits aren’t negatively affected, only use funds in a 529 plan for qualifying expenses, such as tuition, fees, and school supplies.

The Social Security Administration’s (SSA) Ticket to Work program enables SSI recipients to explore free employment services. In addition, Plan to Achieve Self-Support (PASS) allows SSI recipients to set aside funds to cover expenses related to their job search.8

Don’t forget — enjoy the here and now 

Finding time to start putting financial plans in place can help ease your worries about the future for your child with special needs. And help you enjoy life’s everyday moments with your family now.

Remember, there are steps you can take — and you don’t have do it alone. There are resources you can turn to, including a financial professional, who can make recommendations to work toward the financial stability of your child down the road.

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Have additional questions?

A financial professional can help answer any additional questions about your personal situation and help your family prepare. 

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“Special needs” defined

Kids with special needs need help caring for their day-to-day duties. Their needs can include physical, mental, and emotional disabilities.

Care like medical, physical, occupational or speech therapies, special educational support, and financial assistance can help maintain their independence.

1. “Disability and Health.” World Health Organization, November 24, 2021.

2. Price, Jenny. “How Parents Can Build a Support System for Adult Children with Disabilities.” AARP.com, December 1, 2021. 

3. “What Is Supplemental Security Income and How Does It Work?” AARP.com. December 27, 2021.  

4. Nason, Deborah. “If You Have a Child with Special Needs, Here’s How to Plan for Their Life After You Pass.” CNBC.com. December 6, 2021. 

5. Frailich, Ryan. “Making Trusts for Special Needs Children.” Forbes.com. September 10, 2020.

6. The ABLE Act is a tax-advantaged savings account designed for individuals to help pay for qualified disability expenses. Participation in a ABLE Account does not guarantee that the contributions and investment returns will be adequate to cover all expenses related to the  designated beneficiary as a result of living with disabilities.  Contributors to the plan assume all investment risk, including the potential for loss of principal, and any penalties for non-qualified disability withdrawals.

Each state's ABLE program will have different investment choices, costs and fee structures.  You should consult with your financial, tax or other advisor to learn more about how state based benefits (including any limitations) would apply to your specific circumstances.  You may also wish to contact the state specific plan Program Administrator to learn more about the benefits that might be available to you by investing in the an ABEL Account. Not all states have an ABLE program.

7. “ABLE Accounts — Tax Benefit for People with Disabilities.” IRS.gov. 

8. “What Is a Plan to Achieve Self Support (PASS).” 2022 edition. SSA.gov.

You should consult your tax advisor regarding your own tax situation.

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