What Is Special Needs Financial Planning?
It’s common for parents of special needs children to get support from doctors, teachers and coaches. But what about a financial advisor?
Raising a special needs child comes with added expenses, so the ideal financial group for a parent of a special needs child understands the unique concerns they face, and therefore, can be a huge benefit.
At Foran Financial Group, we’ve helped many families plan for the financial needs of their special needs child or family members. Additionally, the firm our advisors partner with, Raymond James, offers a custom Special Needs Trust that can be a cost-effective solution to getting the protection and administration families need. We’re well-versed in special needs trusts, ABLE accounts, government programs and estate planning considerations.
There are a lot of questions surrounding special needs financial planning, so I thought it would be helpful to address some common misunderstandings.
What is Special Needs Financial Planning?
“Special needs” addresses the care and financial requirements of people with cognitive or physical challenges. It is usually used in the context of caring for challenged children, whether young or middle-aged. The goal of special needs financial planning is to arrange an orderly, long-term strategy of care. Without it, the responsibility for care might fall haphazardly on siblings, other family members or the general community.
Specialized doctors and support systems can be expensive. Kiplinger estimates the cost of caring for a special needs child at more than $250,000, not counting college. However, this cost mushrooms for children who need lifetime care. Insurance policies, which are rarely purchased in advance, don’t provide nearly enough money to cover special needs expenses.
There are also many resources available, starting with Social Security Supplemental Security Income (SSI), plus other programs in the government and private sectors. Whatever the resources, it’s important to establish a long-term plan for care, including when the time comes when you can no longer supply care yourself.
The financial aspect of special needs care can be challenging, but the physical day-to-day care can be exhausting. It takes a lot of commitment to handle all aspects of special needs care. Planning might require substantial effort and time up front, but when done well, it can help ease the long-term financial consequences of caring for special needs children.
Contact Foran Financial Group to see how we can help with your special needs financial planning concerns.
Special Needs Vs. Disability
Many people are confused about the differences between the terms “special needs” and “disability.” It’s not exactly clear-cut, but generally, disabilities refer to physical problems with your brain and body. Special needs encompass the educational and support requirements for individuals with physical disabilities, emotional problems and/or learning difficulties. Not all special needs children are disabled, and not all disabled individuals have special needs.
The Social Security Administration uses legal definitions to define “disability.”
- Disability is the inability to perform any Substantial Gainful Activity (SGA), due to physical or mental impairments, which are expected to last at least 12 continuous months and/or result in death.
- Children under 18 are disabled if they have medically determinable mental and/or physical impairment that severely limits functioning, and which are expected to last at least 12 continuous months and/or result in death.
The term “medically determinable” impairment refers to an impairment stemming from physiological, anatomical or psychological abnormalities discernible via medically acceptable techniques. In other words, there must be medical evidence to establish a disability.
Social Security Benefits
Any special needs plan should start with the availability of Social Security Administration (SSA) benefits if the special needs person fits the SSA definition of disabled. Three types of disability benefits are available from the SSA that cover:
- Disabled insured workers less than retirement age.
- Individuals who have been disabled since before age 22 and are dependents of parents entitled to disability or retirement benefits. This category also includes children who were dependent upon deceased insured parents.
- Disabled surviving spouses, age 50 to 60, whose spouses were insured by the SSA.
Disabled and blind recipients must demonstrate limited income and resources.
The SSI disability program and related Social Security programs are complicated, so it’s wise to discuss your options with a professional.
Special Needs Programs
Many states have programs to assist special needs children.
For example, The Individuals with Disabilities Education Act (IDEA) mandates that school systems provide free education programs for disabled children until they reach a set age. IDEA also requires that schools deliver transition benefits to help parents plan for when their special needs children leave school.
Your health insurance policy might also cover some special needs costs. You can work with the insurer’s care coordinators to identify in-network care providers.
An important source of information about state agencies that deal with intellectual or developmental disabilities is available online.
There are also many private agencies that help disabled individuals.
There are many more resources available that specialize in various types of special needs challenges. The ideal financial group will have a professional who has experience with Special Needs Trusts in house and can help you identify the resources that best address your unique needs.
Special Needs Trusts
One important planning component is a Special Needs Trust (SNT), which allows interested parties to contribute funds to help a disabled or special needs person. An SNT can protect against financial abuse by the beneficiary and ensure that the trust’s money is spent wisely. It can also shield money from being used in mean-tested benefits programs such as Medicaid and SSI.
Pooled-asset trusts are another alternative that you’ll want to discuss, as are Medicare Special Needs Plans and Achieving a Better Life (ABLE) accounts, which are tax-advantage savings accounts that can be set up to help disabled individuals receive contribution.
A special needs plan should encompass the financial and physical needs of a disabled and/or special needs individual. It should involve a team of people, including parents and relatives, doctors, educators and a financial advisor. A central component can be a special needs trust that helps compensate for inadequate support from public programs.
If you’re looking for special needs financial planning and aren’t sure where to start, contact me directly to see how we can help.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Raymond James Trust, N.A. is a subsidiary of Raymond James Financial, Inc. Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. are affiliated with Raymond James Trust.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Foran Financial Group and not necessarily those of Raymond James.