Let’s take a minute and acknowledge all the parents out there. As a new dad with an 18-month-old, parenting is one of the most challenging, yet rewarding experiences in life. Now… let’s acknowledge those parents even more so that have a child with a disability. What a challenge… but what a calling and an example of love. Thank you for your work!
I am going to discuss the basics of the financial planning side of having a child with a disability.
Just like any parent, you are responsible for caring for your child until adulthood.
But what if your child won’t be able to live on their own in adulthood?
What if he/she can’t get a job and earn a livable income because of their disability?
Am I able to set aside funds to care for my child into adulthood?
These, along with many others, are questions parents must face when they have a child with a disability. Here’s are some steps I would consider in making the best decisions…
1. Establish a Trust
This is probably the most important step if your child has a disability. Even if you can’t afford to save into the trust, this is still an important first step for a few reasons…
– Add the trust as beneficiary to your estate and life insurance proceeds you intend to pass onto your child. Then name a trustee to manage the trust after you pass away to be sure your estate is managed properly for the benefit of your child.
– If you are concerned about your child being eligible for government assistance like SSI and Medicaid, then establish a Special Needs Trust. Assets held in this type of trust will not interfere with your child’s ability to qualify for these benefits.
2. Name a Guardian
A guardian will care for your child in the event you pass away while the child is a minor. This responsibility could certainly extend into adulthood and they need to be made fully aware of the financial plan that exists for the disabled child.
3. Build Your Savings
Expect the unexpected when it comes to expenses in a scenario like this. Having personal savings can be a life saver. Save as much as you can for your child. No amount is too small. I recommend making saving automatic and systematic every month. Never put the savings in your child’s name as that might disqualify them from government benefits when they enter adulthood. Instead, save into their trust, or establish an ABLE account (similar to a 529 college savings plan, but designed for children with disabilities).
4. Apply for Guardianship or Power of Attorney
Depending on your child’s ability to make decisions when becoming an adult, you may want to maintain your decision making and/or care taking authority over them. Maintaining legal guardianship or holding a power of attorney can accomplish this.
5. Educate Family Members and Loved Ones
Keeping family in the loop with the financial plan will only help the child in the long run. There are many scenarios where miscommunication between family can end up damaging the child’s financial situation later on in life. If family member or other loved ones would like to give money to your child to support them, have them save it into your child’s trust or ABLE account.
