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Special Needs Planning: Evolving with the Times

Jenna and Michael rent out their Carolina mountain cabin to offset ballooning medical costs for their 5-year-old daughter, Margie, who suffers from traumatic brain injury. Carol works part time and has two side gigs, ­dog walking and resume writing, to defray costs for Jamie, her 4-year-old little boy, who has spina bifida and uses a wheelchair.

Most of us may never know what it is like to provide care for a special needs child. Many of us know people who do. The stories are numerous, sad and true. Children of all ages live with afflictions they don’t understand. After all, they’re just kids. And kids are precious. But parents, grandparents and family members don’t understand it either. And they, too, face their own personal struggles.

Even so, families are bright spots for these children. They provide respite care, spiritual, emotional and moral support, while consistently and benevolently giving their time and effort to go above and beyond for the ones they truly love. Sadly, most families know they need professional help but do not seek it.

Where will the money come from?

In a recent Kiplinger interview, advance-planning expert Adam Beck, di­rector of the MassMutual Center for Special Needs at the American College, said that today, while it can cost more than $250,000 to raise ‘any’ child (not including college), the cost could be ‘twice that’ for a special needs child with disabilities, and ‘much more’ if lifetime care is needed.

You might think children with special needs have their costs taken care of by government agencies or insurance companies. Not so. Insurance companies may not cover the necessary surgeries, treatments and therapies, so parents may have to incur unreimbursed expenses, such as deductibles and co-payments. “Insurance doesn’t even come close to covering all of the expenses,” Beck said. So it is important to study your policy to see what is covered.

Both Margie and Jamie, being younger than age 18, have disabilities that could make them eligible for Supplemental Security Income payments. Depending on the family’s assets and income, as well as the rules of the individual state, Medicaid or CHIP (Children’s Health Insurance Program) may be available through the state government.

The Individuals with Disabilities Education Act (IDEA) is a law that makes available a free appropriate public education to eligible children with disabilities throughout the nation and ensures special education and related services to those children.

Infants and toddlers, up to age 2, with disabilities and their families receive early intervention services under IDEA Part C. Children and youth ages 3 through 21 receive special education and related services under IDEA Part B.

When kids become adults

A University of Illinois study found fewer than half of its respondents had done any long-term planning for their children with developmental disabilities.

Once a child reaches age 18, she qualifies for SSI based on her own income and assets. In order to receive benefits, the child must meet the government’s disability standard, have less than $2,000 in assets and receive minimal income. The focus on caring for special needs children once they are past 18 could intensify, however, due to increasingly longer life spans. Adult caregiving expenses for those with intellectual or developmental disabilities, and who will likely outlive their caregiver parents, include potentially 2%-3% inflation-increased, out-of-pocket costs for medications, medical bills, in-home care, nursing home and more.

Nevertheless, the family’s future success is measured by a direct result of early and meticulous planning. So the first place to start is with your Hefren-Tillotson advisor. He or she will gladly introduce you to a special needs attorney.

Yesterday’s problems are tomorrow’s solutions

Without adequate special needs planning, families will endure these financial burdens while never knowing there are viable solutions available to provide future security for your adult disabled child.

Forbes’ Next Avenue contributor, Janet Reynolds, suggests creating an ABLE account, or a special needs trust funded with a last-to-die life insurance policy.

  • To save for your adult disabled child’s future, an ABLE account – Achieving a Better Life Experience – is a savings account that enables a person with a disability prior to age 26 to put aside more than the $2,000 allowed to continue receiving SSI benefits. The account allows a person who is employed to put aside the funds. ABLE accounts could be a good complement to a special needs trust, and a sensible way to gift money to individuals with disabilities.
  • A special needs trust lets parents, other family members and those interested in contributing funds for the benefit of the disabled person, while also enabling him or her to still receive means tested benefits such as Medicaid and Supplemental Security Income. It is basically a document created specifically to provide additional funding, and a legal relationship between the donor, or person(s) funding the trust, the beneficiary, or person receiving the benefits of the trust, and the trustee, or person(s) administering the trust. A family special needs trust holds the money but cannot be used for housing, food or clothing, as these are considered basic needs under SSI laws. It can, however, pay for services not covered by government programs or insurance.
  • If on a limited budget and not able to hire a special needs attorney to create a trust, you can join an existing trust known as a “pooled trust,” which is established and administered by a non-profit organization.
  • Some parents do purchase permanent life insurance payable to the trust covering both parents, even if one parent, as caregiver, doesn’t earn income. The trust can be the beneficiary of both your life insurance and your retirement plans.
  • Similarly, in a last-to-die policy, the policyholder pays an annual premium for a certain amount of life insurance. The policy pays out only after the second partner dies and that money can, if there is a special needs trust, go directly into the trust without going through probate court.

A properly drafted special needs trust is not part of your assets or your child’s assets; it is for purposes of receiving financial assistance. If you would like to learn more special needs solutions, contact your Hefren-Tillotson advisor today for more information.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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