By Vincent Barbera, CFP®, MSFS
Parenting brings both the greatest joys and the greatest challenges to a person’s life. And parenting a special-needs child only exaggerates both extremes of the emotional roller coaster. On top of that, the effects of parenting are not only emotional but financial as well.
Several years ago, the Department of Agriculture estimated the cost of raising a child from birth to age 18 to be around $240,000. For a special-needs child, it can be four times as much. Autism alone costs our nation around $137 billion a year, and Autism Speaks, an advocacy group, estimates the cost of caring for an autistic person to be about $1.4 million to $2.3 million over their lifetime.
As such, it is vital for parents of special-needs children to take financial planning seriously. Here are some steps to take when planning for the care of your precious child.
Seek Outside Help
It’s the American way to be both self-sufficient and independent, but that’s not wise when you’re raising a special-needs child. Trying to do everything on your own will quickly lead to emotional, physical, and financial burnout. It is important to seek outside help, from people that can assist in caring for your child, to support groups of others who understand what you’re going through.
On the financial side, there is help available to you as well. For lower earners, federal programs such as Medicaid to cover healthcare expenses and Supplemental Security Income (SSI) for children that qualify as disabled can really ease the financial burden. Some states even supplement the SSI program with their own money.
If you are not eligible for Medicaid, the Children’s Health Insurance Program (CHIP) may be an option. A joint state-federal effort, CHIP goes by different names in different states but helps parents who earn too much for Medicaid to provide health insurance for their children.
Even if you are not eligible for some of these government programs, your child may be when he or she becomes an adult. It is important to learn about the various programs and develop a plan to help your child take advantage of them once they reach age 18.
In addition to the government, many other organizations and nonprofits offer help. This can be through grants and scholarships or assistance in finding such financial help. Some organizations to look into are the Arya Foundation, Different Needz Foundation, First Hand Foundation, My Life Without Limits, Parker Lee Project, Wheelchairs 4 Kids, and the Humanitarian Foundation. (1) Whatever your child’s particular condition, there is probably an organization out there that specializes in it and offers assistance.
Set Up An ABLE Account
As one would expect, having special needs creates more expenses throughout a person’s lifetime, regardless of age. Just as many parents want to save toward their child’s college education, parents of special-needs children often want to save toward their future expenses.
The problem with saving for special-needs expenses is that usually having assets will make an individual ineligible for government aid. This, in essence, punishes children whose parents try to be proactive about their future needs.
ABLE accounts were created to combat this. They work much like 529 college savings plans, where people can save for a beneficiary’s future expenses in a tax-advantaged account. The difference is that these accounts are only available for special-needs kids and the money is to be used for their future care rather than for college. In addition to tax-free growth, ABLE accounts are not counted against an individual when determining eligibility for government assistance.
Consider A Special-Needs Trust
Another way to fund a special-needs person’s future without putting government benefits in jeopardy is through a special-needs trust. Trusts are more complicated but also provide more opportunities than an ABLE account.
Whether it is a first-party or third-party trust, stand-alone or pooled, there is likely a type of special-needs trust that will fit your situation. Unlike an ABLE account, you will probably need to work with a professional to set up a special-needs trust. A competent financial professional or attorney can help you determine the best kind of trust for your situation and also help you set it up.
Don’t Forget Life Insurance
There is one last thing that all parents need but that is even more crucial for parents of special-needs children: life insurance. What will happen to your child when you are gone? Having a life insurance policy in place will ensure that your child’s financial needs are met in case something happens to you. Whether you need whole life or term life insurance will depend on your personal financial situation and your child’s needs. A financial advisor can help you review your options and determine the best policy for you and your family.
In addition to insuring the parents’ lives, it might be a good idea to insure the special-needs child’s life as well. Families often make huge financial sacrifices for the care of a special-needs child. A life insurance policy could not only pay for burial expenses in the event of an early death but could help provide for the retirement and future of a family that poured everything they had into the future of their special-needs child instead of planning for their own future.
How We Can Help
Parenting a special-needs child can be overwhelming in and of itself; contemplating the financial ramifications of doing so can be even more overwhelming. Because of this, it is important to meet with a trustworthy financial advisor as soon as possible. No matter how old your child is, it is important to consult with a financial expert and develop a plan for how you will take care of your child and yourself in your later years.
At Newbridge Wealth Management, we can help you assess your needs, whether it’s life insurance, a trust, or an ABLE account, and develop a plan so that you can move forward in life with confidence, focusing on your child instead of finances. Click here to access our online calendar and easily schedule a free 15-minute introductory phone call, or you can email us at firstname.lastname@example.org or call 610.727.3960 to schedule a meeting today!
Vincent R. Barbera, CFP®, MSFS is a managing partner and co-founder of Newbridge Wealth Management, a private financial counseling firm located in Berwyn, Pennsylvania. Believing in a patient, disciplined approach to investment management that delivers value and peace of mind, he utilizes a process-driven approach to financial planning that provides comfort and clarity to his clients’ long-term goals. Along with a bachelor’s degree in psychology and business, he has a master’s degree in business and financial planning and Certified Financial Planner™ designation. Learn more by connecting with Vincent on LinkedIn, or send him questions at email@example.com.