Special needs financial planning is a subset of financial planning concerned with meeting the short and long-term needs of children and adults with disabilities. If you’re the primary caregiver for a child or another family member with special needs, it’s important to consider how they’ll be provided for during your lifetime and beyond.
Financial planning for special needs families requires a personalized approach, as every family’s situation is different. It’s never too late, or too early, to think about how to shape your family’s plan.
Key Points
• Personalized financial planning for those with special needs can help provide tailored support and quality of life.
• Government benefits like Medicaid, Supplemental Security Income (SSI), and Medicare are essential for covering care costs.
• ABLE accounts offer tax-advantaged savings for disability expenses without disrupting eligibility for federally funded benefits, such as SSI.
• Estate planning can include creating wills and trusts and appointing guardians to secure financial stability.
• A letter of intent guides future caregivers on daily routines and care needs.
The Importance of Special Needs Financial Planning
A financial plan is a roadmap to help you reach your financial goals, whether that means paying off your home early or retiring with $1 million in the bank. Accordingly, financial planning for special needs has some additional considerations. It also takes into account the financial demands of caring for someone with disabilities or special healthcare needs and what’s necessary to provide them with the best quality of life possible.
Developing a special needs financial plan is important for several reasons.
• Planning allows you to establish some continuity in the type of care your loved one receives while you’re living and after you’re gone.
• Government benefit programs may have specific requirements your loved one will need to meet to receive care. Setting up a disability trust account or another type of trust as part of your special needs financial plan can help ensure they’re eligible.
• While your focus may be on providing care for your loved one, you can’t afford to neglect your own goals, like retirement. A special needs financial plan helps you balance those goals against your loved one’s care priorities.
A comprehensive plan spans every stage of your loved one’s life and anticipates their needs at different ages. Financial planning for special needs adults, for instance, may look very different from financial planning for special needs infants, children, or teens. And planning ahead, and getting the planning process started at an early age means you don’t have to catch up later on.
Key Components of a Special Needs Financial Plan
What a special needs financial plan should cover depends largely on the specifics of your situation. At a minimum, you should probably be thinking about:
• Your immediate and long-term financial planning needs, including life insurance, disability insurance, and retirement savings
• Your loved one’s eligibility for government benefits that could help cover the cost of their care
• Whether you’ll need to create a transition plan that allows your loved one to live independently
• Long-term care planning for your loved one
• Estate planning and what you’d like to happen to your assets after you’re gone
It’s also important to think about who will help you execute your plan. That might include a financial advisor, accountant, and/or estate planning attorney. You’ll also need to decide who will act as guardian or power of attorney for your loved one in your absence if they’re unable to make decisions for themselves.
Long-Term Care Considerations
Special needs financial planning means thinking about the degree of care someone will need lifelong, the cost of that care, and how to pay for it. It’s important to consider your loved one’s needs and the options you have.
There are different ways to approach care, including:
• Taking care of your loved one yourself
• In-home care assistance, either on a part-time or full-time basis
• Day programs that provide care for special needs children or adults
• Group or community care homes
• Intermediate care facilities
• Independent living
Your loved one’s age and health care needs can dictate which type of care is most suited to their situation. Cost is an important consideration in each scenario.
Your health insurance may pay for some of your loved one’s needs if they’re eligible for enrollment in your plan. You may also apply for Medicaid on their behalf. Medicaid is a government-funded program administered at the state level that can cover a variety of costs related to special needs care, including:
• Preventive services
• Primary and specialty care
• Prescription drugs
• Medical devices
• Long-term care and support
Eligibility for Medicaid is automatic in most states when someone qualifies for Supplemental Security Income (SSI). SSI provides cash payments to children and adults with disabilities.
Medicare is also available to individuals under 65 with qualifying disabilities and can cover certain nursing care needs.
Independent of these programs, you may set up an ABLE account to help cover long-term care needs. The Achieving a Better Life Experience (ABLE) Act of 2014 created ABLE accounts which offer a tax-advantaged way to save money for qualified disability expenses.
You can open an ABLE account on behalf of a designated beneficiary and contribute up to the annual gift tax exclusion limit each year. Funds in an ABLE account can be used to pay for qualified disability expenses, including:
• Higher education
• Housing
• Transportation
• Job training and support
• Healthcare
• Personal support expenses
• Basic living expenses
• Legal expenses
• End-of-life care
• Burial and funeral expenses4
Someone can have an ABLE account and still be eligible to receive Medicaid, Medicare, or SSI to help pay for special needs care. If their ABLE account balance exceeds $100,000 that can affect their ability to continue drawing SSI benefits but it won’t impact their Medicaid or Medicare eligibility.
These are all issues that you might want to talk about with a financial advisor. They can go into detail with you about how to qualify for Medicaid in your state, how to plan ABLE account contributions, or whether it makes sense to establish a special needs trust for your loved one.
Retirement Planning With a Special Needs Child
While you may be focused on meeting your child’s needs, it’s important to consider where your retirement fits into your financial plan. Start by evaluating your assets, which may include:
• A 401(k) or similar workplace retirement plan
• A traditional or Roth IRA
• SEP IRAs or a solo 401(k) if you’re self-employed
• A taxable brokerage account
• A Health Savings Account (HSA) if you have a high deductible health plan
Look at how much you contribute to each account, what you’re paying in fees, and the returns your investments generate. Then, consider what age you’d like to retire and how much you think you’ll need.
Calculators can help with this step. You can use a 401(k) or an IRA calculator to estimate how much your money will grow, based on what you’re saving now.
Once you have a target savings number, ask yourself what you can do to increase your chances of reaching it. For instance, could you:
• Increase your 401(k) contribution rate
• Max out an IRA or HSA
• Change up your investment mix to seek better returns and/or reduce the fees you’re paying
• Supplement tax-advantaged retirement accounts with a taxable brokerage account
• Stash money in high-yield savings accounts or CDs for liquidity
What if you don’t have anything saved for retirement? You could open an IRA through an online brokerage and start contributions based on what your budget allows. For 2025, you can save up to $7,000 in an IRA or $8,000 if you’re 50 or older, the same as 2024.
Estate Planning for Special Needs Families
Special needs estate planning considers both your needs and your loved ones. What you’ll include in this plan can depend on whether you’re talking about estate planning for a special needs child or estate planning for special needs adults.
At a minimum, you’ll need a last will and testament. Your will allows you to specify how you want your assets to be distributed when you pass away but you can also use it to name one or more guardians for your special needs loved one. You may want to work with a special needs attorney to draft a will since the laws for creating one vary from state to state.
Another aspect of special needs estate planning centers on what will happen to your retirement accounts. When managing retirement accounts that allow you to name a beneficiary, it’s important to choose wisely.
Leaving your 401(k) or IRA directly to your child could impact the eligibility to receive certain government benefits. Aside from that, inherited IRAs are subject to required minimum distribution (RMD) rules, which could add another wrinkle to financial planning for special needs children.
Under these rules, non-spouse beneficiaries are required to withdraw all the money in the account within 10 years. The SECURE Act allows certain individuals with disabilities, or a special needs trust fund established on their behalf, to qualify as eligible designated beneficiaries. An eligible designated beneficiary may follow the 10-year withdrawal rule or take withdrawals over their life expectancy.
You’d have to determine whether your child qualifies as an eligible designated beneficiary and if so, whether it makes sense to name them as beneficiary to your retirement accounts directly or establish a special needs trust to inherit those accounts. If you prefer to establish a trust you could name it as the beneficiary to any life insurance policies you have as well.
Recommended: Why You Need a Trust
Creating a Letter of Intent
A letter of intent (LOI) includes a detailed profile of your special needs loved one, including their daily routine, care needs, and financial situation. This document is not legally binding; instead, it’s meant to act as a guide for those who will assume care duties after you’re gone.
Including a letter of intent in your special needs financial plan allows you to communicate what your loved one needs now and what their needs might be in the future. You can update your LOI annually to adjust for any changes to your situation.
There’s no specific template or form your letter of intent needs to take, however, it’s important to make it as detailed and thorough as possible. If you need direction on how to write a letter of intent you can find free templates to use as a guide online.
Working With Special Needs Financial Planners
If you find the idea of creating a financial plan for special needs overwhelming or you don’t know where to start, you may benefit from talking to a financial planner or advisor who specializes in this area. A special needs financial planner can look at your situation and help you create a financial plan that allows you to reach your goals while making sure your loved one is taken care of.
You may look for a financial planner or advisor who holds a chartered special needs consultant (ChSNC) designation. This credential means they’ve completed education courses in the area of special needs financial planning.
When choosing a financial advisor, consider:
• What experience they have with special needs planning
• What kind of clients they typically serve
• Which services they can help you with
• How much they charge
If you’d like to find a certified financial planner near you, you can use the CFP Board’s search tool to see who’s available in your area.
The Takeaway
Financial planning and estate planning for special needs are important priorities if you care for a child or adult with disabilities or significant medical issues. Creating your plan can take time, but you don’t have to go it alone. Take this financial planning quiz to find out how a financial advisor can help.
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FAQ
How does special needs financial planning differ from traditional planning?
Traditional financial planning concerns itself with your goals, which may include college planning, paying off your mortgage, or retirement planning. Special needs financial planning can include those things but it also extends to creating a lifelong plan of care for a loved one with disabilities. The issues and challenges of financial planning for special needs tend to be more complex.
When should I start special needs financial planning?
The best time to start special needs financial planning is when you become the caregiver for someone with disabilities. Delaying planning could put the person you’re responsible for at risk of not getting the care they need if something should happen to you.
Can siblings be involved in special needs financial planning?
If you’re the parent of a child with special needs, involving siblings in financial planning often makes sense. You may designate them as the person you’d like to assume responsibility for their sibling’s care or financial assets after you’re gone. Making sure they’re involved in each stage of planning can make the transition as smooth as possible when the time comes.
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