CHAPTER 9: Planning Considerations for a Special Needs Child 

If you're a parent like me, then you know the desire to care for your kids never truly goes away, even after they become adults. However, if your child has special needs, that protective desire turns into a deeper yearning to find a way to care for them, not only during your lifetime but long after you are gone.

The extra medical and physical care required for special needs children can be quite costly as well. Therefore, many parents find themselves working more years than they intended and sacrificing more than they planned in order to ensure their child's care-related needs are provided for. The good news is there are a host of resources available that can reduce some of the financial strain on one's own retirement plan.

Federal and state benefits for special needs adults

The first place to start looking for assistance is from federal and state government-provided benefits, including Social Security, Medicare, and Medicaid. Here are the most common governmental financial resources available for those with special needs.

  • Supplemental Security Income (SSI) - A person with special needs and a limited income may be able to receive monthly payments from the Social Security Administration (SSA). If approved, benefits are paid through the Supplemental Security Income (SSI) program to cover everyday needs as well as medical care and other expenses. 
  • Social Security Disability Insurance (SSDI) - Your child can receive disability benefits based on their needs while they are under 18. To continue receiving benefits into adulthood, your child must have a disability that started before they turned 22.


Keep in mind that government-provided special needs benefits, and the rules to qualify for them, can be defined by complex qualifiers. An advisor, in conjunction with a social worker or attorney, may be able to help walk you through the complexities, and determine which benefits your child may qualify for.

Of course there also may be local private and charitable organizations right in your area that might be able to provide assistance based on your family's particular situation or care needs. Reaching out to your local county health department, municipality, churches, or professional community service organizations (Kiwanis) are all great places to start.

Besides planning for the added complexities of caring for your loved one, the entire retirement planning process becomes significantly more complex for the caregiver when there is a special needs child involved. Traditional retirement planning concerns such as where to live or even take a vacation quickly can change in complexity when you add in the factor of a special needs person.

How to assign caregiver rights

Depending on your child's disability, it may be necessary to identify one or more people to step in and make decisions on their behalf when you are not available or can no longer do so. Who is going to make day-to-day health-related decisions for the special needs child in your absence?  How will they be cared for?  Where can they stay?  Who do you trust?  Assigning caregiver rights to a trusted individual might be an answer. 

  • Power of Attorney (POA) - A POA can give special authority to a third party (such as a close friend or family member) for making decisions on behalf of a disabled person. The authority granted by a POA is more limited than guardianship, and it is often all that is needed. You can limit the power of attorney to apply only for certain decisions involving finances or medical care, but you may want to cover both. It’s also possible to establish a “springing” power of attorney, which only takes effect when certain conditions are met. 

  • Health Care Proxy - This allows someone to make decisions concerning medical care in the event your child becomes incapacitated. In the case of a special needs child, you may want to establish a healthcare proxy that names a trusted friend or relative as a backup if you become unable to make decisions on your child’s behalf. 

  • Guardianship - Of the tools you have available to you, establishing guardianship will be the most thorough and restrictive. When the court appoints a guardian over your special needs child, that person will have full control over their decisions, including their financials, health, food, and property. There are situations when this is warranted, but make sure you think through this carefully and consider the type and severity of your child's disability. 

To carry any weight legally, you must have specific legal documents drafted by an attorney that specifies who will handle what and in which situations. Regardless of the legal instruments you have in place, the person you name to make decisions should be someone who genuinely cares for your disabled child and has their best interest in mind.

How a special needs trust can protect your child

If you have assets you want to leave to your child, then a special needs trust (SNT) could be one of the most valuable options you have. 

 Like other trusts, an SNT provides a means of setting aside money or other assets to be used for a specific purpose. For instance, you can assign these assets to support your disabled child and provide for the cost of their care. 

 So what makes an SNT unique and valuable? Typically, a disabled person's ability to qualify for government-provided needs-based programs (including SSI and Medicaid) is dependent on not having significant income or assets. Assets in a special needs trust however, won’t count against their qualification for benefits because those assets are technically not owned by the disabled beneficiary.  Instead, the beneficiary is only receiving a minimum maintenance allowance generated by the trusts assets to cover basic essential needs.

An ABLE account can help pay for special needs care

ABLE accounts are another way to save for special needs expenses while maintaining eligibility for government assistance.  

These accounts work similarly to Roth IRAs; however, they’re earmarked for covering special needs care expenses. The money you contribute isn’t tax-deductible, but it grows tax-free, as long as it is used to pay for qualified disability expenses. 

Another great benefit is that anyone can contribute to an ABLE account — including friends and family. However, the total amount of all contributions cannot exceed $16,000 per year.

There are some rules to consider regarding the total balance in an ABLE account. For instance, while ABLE accounts don't affect Medicaid eligibility, they can impact SSI payments. If the account balance exceeds $100,000, then eligibility for SSI is suspended. 

Beyond that, each state may also limit how much money you can have in an ABLE account. 

The role of life insurance for funding a trust

Another way to protect your loved one is to incorporate life insurance into their special needs care plan. If you don’t already have significant resources such as bank accounts, property, or investments to leave to your child upon your passing, life insurance can be a cost-effective way to bridge a gap in funding.  

 With a life insurance trust, also known as an irrevocable life insurance trust or ILIT, you can arrange to have the proceeds of the policy be used to fund the Special Needs Trust upon your passing.

 Better yet, it’s also a tax-efficient planning tool as well! When the insurance policy pays out to a trust, the death benefit will not be taxed and it won't be included in your gross estate. In short, it's an outstanding and popular funding mechanism for special needs planning purposes!

A retirement advisor can be especially beneficial for special needs planning

Planning for retirement can be particularly challenging when you have a special needs child. This is because you're not only preparing for yourself but also for your child’s well-being, both now and after you are gone. 

 In addition, the rules for applying for special needs benefits are often arduous and complicated. These factors can make an already emotionally taxing endeavor even more difficult. Fortunately, you're not in uncharted waters. Retirement advisors can help steer the boat and assist you in finding the right help for you and your family. 

 Watch for additional posts and planning tips in the weeks ahead, or contact us at any time to discuss your planning needs.

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The information being presented herein does not consider your particular investment objectives or financial situation and does not make personalized recommendations. This information should not be construed as an offer to sell or a solicitation of an offer to buy any security. One Tree Hill Advisors, Independent Advisor Alliance and LPL Financial do not provide tax advice, legal advice or services. This material is not intended to replace the advice of a qualified tax adviser or legal counsel. Individuals should contact their own tax professionals and attorneys to help answer questions about specific situations or needs prior to taking any action based on this information. We believe the information provided is reliable, but do not guarantee its accuracy, timeliness, or completeness.

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