What's the Best Financial Protection for a Special Needs Child?

Dear Carrie: I'm 50 years old and in good health but need to create a secure safety net for my 17-year-old son with autism. He's living at home now, and I'm worried in case something happens to me. I'm not wealthy; what are my options? --A Reader

Dear Reader: I'm glad you're asking this question -- both for yourself and for the increasing number of parents who are faced with caring for a special needs child or adult.

According to the Centers for Disease Control, approximately 20 percent of U.S. adults have a disability. Recent CDC data also states that 1 in 88 children has been identified with an autism spectrum disorder.

While handling the day-to-day care of a special needs child can be challenging, planning for the future is equally important -- and potentially complicated. That's because, while there are a number of government assistance programs available, how you set up additional financial support can directly affect whether or not your child will qualify for public benefits.

So it's not just a matter of providing a financial safety net; the methods you use are also crucial to the ongoing well-being of your child.

Here are some things you can consider doing now to help give your son the security he needs -- and give yourself some peace of mind.

First, establish yourself as your son's guardian when he turns 18. Otherwise, your son will be considered an independent adult under the law, and you may not have access to his medical records or make decisions on his behalf.

There are two government programs that your son could qualify for: Medicaid, which covers most medical services; and Supplemental Security Income, which provides a monthly stipend for basic living needs. In order to maximize benefits, apply for these benefits when your son first becomes eligible at age 18.

SSI and Medicaid are a good start. But if you want to make sure your son has more than the bare bones, there's a catch. In most states, an individual with special needs can't have more than $2,000 in assets to be eligible for assistance. This means that if your son owns or inherits more than the eligibility requirements allow, he'll lose government support.

Fortunately, you can get around this problem by setting up a special needs trust (also called a supplemental needs trust). With this type of trust, designed especially for individuals with a disability, the assets belong to the trust, not to the individual, so there's no issue with continuing to collect government assistance.

You designate a trustee who will manage the assets and use them for your son's expenses above and beyond what the government programs cover. But it's important that the money isn't used for the same things the assistance covers. For example, it can't provide for basic expenses such as food or shelter, but it can cover essential quality of life expenses such as clothing, vocational training and travel. It's also important that the funds are not paid directly to your son. Both could cause him to lose his benefits.

It's important to note that this is a specialized trust that must be set up and managed carefully. You can fund it either while you're alive or as a part of your will. The rules vary by state and by the source of your funding, so you'll want to consult with an attorney experienced not just in estate planning but also specifically in special needs trusts. Two professional groups that can provide references to lawyers experienced in special needs are the Academy of Special Needs Planners and the Special Needs Alliance.

At the same time you set up the trust, update your estate plan and leave specific instructions regarding your son. The basics should include:

--A will-- Make sure to leave any assets designated for your son's care to the special needs trust, not directly to him. You can specify that the trust will be the beneficiary of a retirement plan or a life insurance policy.

--Trustee-- Appoint a trusted individual or financial institution to manage the financial aspects of the trust.

--Guardian-- Appoint one or more guardians for your son who manage the day-to-day care of your son after your death. They will make decisions about medical care, personal finances and everyday living.

--A letter of intent-- This should describe your desires for your son's care, plans and expectations for his future. Think of it as a guide for his caregiver.

If you have other children, explain your plans. Tell them how you're dividing your assets and how you've provided for their brother. It may lessen their worries about the future.

Also, if there are relatives who may consider giving or leaving assets to your son, make sure they're aware of the trust and the importance of not putting money directly in his name.

While you're preparing for your son's future, don't forget about your own. Keep contributing to your 401(k) or IRA. And try not to dip into your retirement savings to cover your son's needs. Ideally, the two of you will have many more years together. You want to be financially secure yourself so you can enjoy them to the fullest.

Agreed. Unfortunately, the Feds and the states have set the bar way too low. Virtually anybody with enough money to buy a “welfare lawyer” can get benefits.

This is why there has been a massive increase in the number of people getting SSI. As their unemployment benefits expire, they buy their way into SSI.

Right now, at this moment, the economy of Greece has collapsed. People are discovering that food and medecine is in short supply, electricity and potable water from a municipal source may cease, and public security will be nonexistent. If you’re disabled, you are in mortal danger.

My dad has alzheimers disease. Though still alive, most times cognizant and doing well, he must rely on his pensions and social security to provide him with the financial ability to sustain the care he requires. It is beyond the ability of his childrena and grandchildren to care for him directly.

In the event of an econmic collapse here, in the U.S.A., all pension money (which is nothing more or less than a Ponzi scheme) will evaporate, along with Social Security and government entitlements.

This is going to be real hard for most people to grasp, but caring for the disabled after an economic collapse will be nearly impossible.

“F that. The Government should not take care of your brat. that is your job!!!!!!!”

That’s quite a hard line naps... There are really only two choices for adult “brats” that are disabled. Society can euthanize them, or take care of them.

Suppose your son or daughter was in an accident and ended up a paraplegic. Perhaps you could care for them at home. What happens to them when you die? Nursing homes cost 7 or 8 thousand a month, and your kid may live another 20 years after you are dead. Think about it...

There’s no way you could ever take care of your “brat” in the long term.

This kind of situation is EXACTLY what public assistance should be about. What it shouldn’t be is taking care of able bodied folks who are just too lazy to work.

God help the poor boy, when his mother is gone.

What if she simply doesn’t have enough money to provide for the rest of his life?

What if she does leave him enough money? Who will be a trustworthy guardian? Who will care for him and not warehouse him?

I’ve heard mothers of disabled children say they think about killing both themselves and their children when they reach old age. I thought about it myself, when I didn’t know how well my son would do, but a more life-affirming solution was to give him siblings. Thank God he has done well, and will be able to be completely independent.

If the government has any social welfare function at all, it is to help the truly disabled who cannot provide for themselves, and help those families who have extraordinary expenses. Not the scammers, not the malingerers, not the lazy, but the truly needy. I don’t begrudge them a dime.

This is the problem I have with people today. They all have their pet projects and they refuse to allow the government to become smaller. Conservatives are just as bad as Liberals when it comes to spending. We will NEVER recover if we have pet projects. Let the churches and charities take care of these folks.

Bzzzzt - wrong. The correct answer should have been:

1) Reduce your debt
2) Manage your taxes
3) Insurance policies for yourself and yourself that include:
- medical
- long term disability
- life insurance with living benefits
4) Develop multiple streams of income that are diverse and do not require you to use your time or effort to realize the income.

Yup, I hear that all the time with my daughter, the one I was advised to abort based on the results of her Quad Panel at 4 months.

Thank you for supporting my pro-life choice. Then again I guess she will just join her mother in heaven after living in a snake pit after I die. The mother who was diagnosed with terminal cancer after undergoing a physical to buy life insurance, after my employer canceled our spousal coverage. But, Its that's my fault, I should have known that she would die at 38.

Seriously harsh. I have a learning disabled child. She’s 33, mentally she’s about 8. There is no way we can save enough money to take care of her when we are gone. Right now she lives at home and works at Goodwill, she makes about $60 ever two weeks. We have family that’ll help, if something happens to us, but, I wouldn’t want the full burden to be on them. I figure we pay plenty in taxes, if our taxes were cut way down, we could afford to save the money that would be needed. I enrolled her for benefits as soon as I could, just in case something happened to one of us. She has no siblings, I lost 3 babies. If you think for one minute I”m not going to get what my daughter needs think again. I hope you never have a seriously handicapped child. You have no idea how hard it can be, and the financial strain it is even with help. There isn’t a day that doesn’t go by, that I think, what’s going to happen to her when I’m gone? Who’s going to love her like I do? Will she be abused? If our government collapses will she be murdered to get her out of the way? I have to give those things over to God, I can’t control any of that. But, it is things I do think about.

You think disabled adults who are dependent are “pet projects”?

Count your blessings that you have not had to deal with this anguish.

I am disappointed to hear such heartlessness from a fellow FReeper.

Seriously harsh. I have a learning disabled child. She’s 33, mentally she’s about 8.

I have a nineteen year old step son with autism, mentally he's about 6. Sessami Street is his favorite show. Ufortunitely like all 6 year olds he can have tantrums sometimes violent ones, only he's not 6 he is a strapping 19 year old. I am 50 now and can handle him but when I think to the future it gives me pause. What will I do when when I am 60 or 65? There are no good answers and the medical "professionals" just throw more meds at you and hope they help. Not sure what the future holds.

My disabled daughter required 25 surgeries. The first time, employers are sympathetic, the second time they just look at you. The third time, you are fired.

Raising a disabled child is akin to financial armegeddon. There's no daycare after they turn 12 due to insurance and, believe me, no one wants to babysit.

Plus, the worry of "what's going to happen after I'm gone" is always, always with you.

On top of that, it takes a toll on the caregiver's health.

Just as you cant get a job from a poor man, one of the axioms of taking care of someone else is that you first must be able to take care of yourself. In planning for the care of others, this means that you must protect your income / wealth from unexpected drains.

Health insurance protects you against the cost of an illness / injury - typical medical bills.

Long term disability insurance protects your wealth against the drain of you become disabled and are unable to earn an income. Say some idiot in a car hits you and now you are not able to work.

Life insurance with living benefits protects you in several cases most notably if you are diagnosed with a terminal condition (say 24 months or less to live) you can withdraw some portion of the policy right away to set up a transition plan.

Okay. I fully agree with the taking care of self first (36 years working with life, disability income, LTC, investments, etc. insurance). And I am always glad to hear someone advocating to plan/insure for those contingencies.

But if all those things are in place, then still a plan is needed to take care of the special needs child.

(Not trying to be argmumentative; I just had intrepreted your earlier post to mean that the ideas you listed somehow solved the problem of future care for the child).

My point is that UNTIL those things are in place, planning for the long term care needs of a dependant is at best ill conceived, and at worst, down right foolish. No sense in planning for a trust if you dont have any money to put into it. And if you DONT have the insurances, and then you get hit with a medical bill, your long term planning is now shot because .... you wont have any money to put into the trust / plan, etc.

After step four - developing multiple income streams, when you have a positive cash flow, you can now fund the care plan. Until then, focus on the basics.

You all act like we don’t have 15 trillion in debt. Why on Earth do you all act like socialist? I don’t think some of you belong on this CONSERVATIVE site which is a proponent of fiscal responsibility. We cannot afford anything at this point. Didn’t Wisconsin teach you anything?????

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