It’s the biggest elephant in the room, one topic parents with children with special needs can be afraid to dissect because it can seem so overwhelming: Financial security and money.
For parents of children with special needs, this is a topic often difficult to navigate because they are aware funds to make things happen must come from somewhere. The “somewhere” is a cloud that lingers over parents’ heads, leaving them full of stress, anxiety and sometimes wreaking havoc on marriages.
Heading into the New Year, we collected some tips to help parents begin making a few steps to make sure their child’s future is not limited by financial problems. Sara Shalvey of Northwestern Mutual often has these conversations with parents and offers a few suggestions:
“There are several options for parents interested in helping their child attend college. 529 plans, ABLE accounts, and scholarships at the local level and universities are all great places to start,” she says. These plans are also suitable for children who will not attend college as well.
Start early
Getting a head start on planning for the future of your child is important.
“Not only are we making sure our children with special needs are taken care of, but we are also ensuring that the parents are able to retire and plan for other goals. Basically, you have to be able to live your life in a way that promotes both happiness and security for your entire family,” Shalvey says.
She suggests looking into a special needs trust. These trusts are highly touted because they allow an individual’s financial needs to be met. They serve as supplemental income to cover costs SSI or Medicaid will not cover and allow parents to put money from assets into them.
Of many of the savings plans available, ABLE accounts, are the least complex and are tax-friendly. These tax-advantaged savings accounts are designed specifically for individuals with disabilities and their families.
These accounts are also special because money can be contributed to them from anyone. Many families use these accounts for financial Christmas gifts and birthday presents.
The 529 plans are generally thought to be college savings plans. But when it comes to special needs, some parents use these for savings plans. It’s important to note that these plans act like Roth IRAs since they are not tax-deductible.
Just as with ABLE accounts, many families set these up so that family members can make contributions for holidays and special occasions.
A few other steps to consider
1 Build a team of professionals and trusted people. This team should include an attorney with expertise of special needs families, a family member or trusted individual that can stand in the gaps if one or both parents die before the child, and a financial expert well versed in special needs financial planning.
2 Letter of Intent. This is a letter stating what you envision for your child’s future. While the document is not a legal document, it does serve as a roadmap or blueprint for the people taking on the care of your child after you die.
3 Establish realistic goals for your child and family. This is important because this helps solidify how you plan to fund the savings plans you opt into.
4 Implement a plan. This is a crucial part of the process, since starting is half the battle. This can be as simple as sitting down with a financial advisor to begin the process.
