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FINANCIAL
allow a future guardian the best opportunity to maintain the quality
of life the child currently maintains.
Retirement Planning
Financial planning can be a challenge for parents of special-needs
children, especially when thinking of their own retirement. How do
you pay for the child’s care when you are retired?
The first option everyone should consider is government assistance.
Disabled children up to age 18 can receive Supplemental Security In-
come (SSI) from Social Security along with Medicaid if their parents
meet the program's low- income and asset requirementsv. After the
child turns 18, they should be able to qualify for these benefits on their
own. This underlines the importance making sure assets and benefi-
ciaries are titled correctly. Along with SSI and Medicaid, special needs
families should consider Social Security Disability Insurance (SSDI).
SSDI pays benefits to adults with disabilities (if the disabilities began
before the adults turned 22 years old). SSDI is also available for a child
if one of the parents is deceased or if one of the parents is already
receiving Social Security retirement or disability benefits.
Additionally, most folks saving for retirement are aware of the
benefits of saving money in a qualified retirement plan or an indi-
vidual retirement account (IRA). Parents of special needs children
should consider adding an ABLE account to their savings plan. In
2014 Congress passed the Achieving a Better Life Experience
(ABLE) Act which allows for the creation of tax-advantaged savings
plan for the disabled. Earnings and withdrawals for qualified expens-
esvi are federal and state tax free. Also, assets below $100,000 in the
ABLE account will not be counted as a resource for SSI and Medi-
caid testing. Over 20 states have created ABLE accounts and most
of those states do not have residency requirements.
Estate Planning
Recent polls show more than half of Americans do not have a willvii.
While this may be problematic for most, with a special needs child this
can be a tragic mistake. Parents of a special needs child absolutely should
create a will and consider including a special needs trust with an appro-
priate trustee as well as a guardian for the child. All assets intended to
be passed along for the benefit of the special needs child should go into
the trust. If done properly this will ensure the child won't lose govern-
ment benefits such as SSI or Medicaid. When looking at their assets,
parents and guardians sometimes overlook accounts where the child be
listed as a beneficiary (e.g. IRAs, Retirement Plans, Life Insurance, Trans-
fer on Death, etc.) If those assets are intended to benefit the child, it is iv http://texasguardianship.org/guardianship-information/faqs-2/
important to designate the special needs trust, not the child outright, as
the beneficiary. If these assets end up in the name of the child individ-
ually, the child may lose access to government benefits. Another benefit
of a special needs trust is that assets in the trust should be protected
from “creditors and predators” if the child is ever sued.
PLANNING
Communication
All this planning can add a tremendous amount of value, but it
can also be rendered ineffective if the plan is not communicated with
and understood by all family members and loved ones who care for
the child. For example, parents of a special needs child recently in-
formed us that their parents (grandparents of the special needs child)
transferred money into a 529 plan for their child. The child will likely
not be attending college, and those funds can only be used for qual-
ified college education or rolled over to a different child’s 529 plan.
The family could have used help paying for the child’s expenses re-
lated to the medications, physical therapy, and daily tutoring. If a
special needs child has wealthy family members who would like to
help financially, writing a check or funding a 529 may not be the most
efficient way to do so because those would be subject to federal gift
taxes. There are likely educational or medical expenses that the family
members would be able to pay directly, which would not qualify as
a taxable giftviii. It may make sense to have a family meeting to ex-
plain the plan or regular email updates to communicate any recent
or important changes.
The challenges of caring for a special needs child can be daunting.
A financial planner with experience in special needs planning can in-
troduce you to the appropriate service organizations, attorneys, and ac-
countants, and will partner with them to make sure the optimal plan is
put in place for you and your family. A well designed financial plan
should put you in a position to achieve your retirement goals and ensure
your child always receives the highest quality care, love, and support.
David K. Alvarez is a Certified Financial PlannerTM professional with In-
tercontinental Wealth Advisors, LLC a boutique wealth management firm that
is headquartered in San Antonio and recently celebrated its 35th anniversary.
The primary focus of David’s work is the Healthcare and Non-Profit commu-
nities. David serves on the Board of Directors for the Blood and Tissue Center
Foundation and the San Antonio Public Library Foundation. He may be
reached at (210) 271-7947 or dalvarez@intercontl.com.
i Boyle CA, Boulet S, Schieve L, Cohen RA, Blumberg SJ, Yeargin-
Allsopp M, Visser S, Kogan MD. Trends in the Prevalence of
Developmental Disabilities in US Children, 1997–2008. Pedi-
atrics. 2011; 27: 1034-1042
ii www.cdc.gov/ncbddd/developmentaldisabilities/index.html
iii In some states, guardianships are called conservatorships. In Texas
they are called guardianships.
v The Social Security Administration has an online Benefit Eligibility
Screening Tool https://ssabest.benefits.gov/
vi List of Qualified Disability Expenses available on the social secu-
rity website: https://secure.ssa.gov/poms.nsf/lnx/0501130740
vii Gallup poll based on telephone interviews conducted May 4-
8, 2016 http://www.gallup.com/poll/191651/majority-not.aspx
viii https://www.irs.gov/instructions/i709/ch01.html
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