How Having a Special Needs Loved One Affects Estate Planning and Retirement Planning

Q. Our daughter, Sophie, has an Autism Spectrum Disorder (ASD). She is verbal, but needs lots of help academically and with her social skills. She may not be able to live independently when she becomes an adult. When it comes to retirement planning, it is a balancing act to try to know how much to put aside for her, and how much to put aside for ourselves. If we put it all aside for Sophie to make sure she’s taken care of, but then have nothing left for us, that’s not going to work really well, and the same if we don’t leave enough for her. What are some things we should consider, as parents of a special needs child, when it comes to estate planning and retirement planning? Thanks for your help!

A. Many parents of children with special needs understand that their children’s care affects every aspect of family life, including retirement planning and estate planning. For parents with a special needs child, similar to yourselves, investing for your retirement and ensuring that care for your child will be secure in the future are two critical tasks that should be taken into serious consideration.

Depending on the child’s needs, parents may need to support their offspring well into their own retirement and make arrangements to care for their child — both during their retirement and after their death. To do so requires navigating financial and legal considerations and several types of planning, as I will discuss in this article.

How Parents of Children with Special Needs Can Plan for Retirement

For many parents of children with special needs, the whole retirement planning process is made more complex with the added layer of planning for their child’s future as well as their own. Here are some tips for how parents of special needs children can plan for retirement:

Begin early: Similar to early intervention, once parents have identified their child has special needs, the sooner they start planning, the better. When you have a child with special needs in your family, it’s very important to realize that there will be a lot more to consider, and because of this, it is wise to create a plan as early as possible.

Perform a budget analysis: Don’t just look at what your retirement income needs will be, but also what it may cost to provide for your child after you are gone. Once you know these two figures, you can work with a retirement planning professional, such as myself, to try to reconcile them by figuring out what assets and income streams would be best suited.

Set more aside: For many families, providing financially for their child ends a year or two after college. However, for a parent of a child with special needs, that financial assistance may never end, and this should be taken into account during planning. For many parents of a special needs child, there’s a good chance the child will be living with you well into your retirement. This will likely impact the income you will need. For instance, if you would have needed $80,000 per year to retire comfortably, you now may need $100,000 or more to provide for your child’s various needs, such as therapies, hobbies, transportation, etc. If the choice is made to have the child live apart, such as in a private-run group home, the costs can be substantially higher; I’ve seen food/housing/supervision around $4,000 per month and in some cases, depending on the level of care required, it could be much more than that.

Work longer: Some people who have children with special needs find themselves working longer than they had wanted to in order to make up for child-related expenses, their assets diverted from their retirement savings to afford future costs for their adult child with special needs.

Consider an ABLE account and other programs and benefits for people with disabilities: ABLE accounts are available to individuals with disabilities. Money in an ABLE account can be used for medical treatment, education and job training, assistive technology, housing and many other things to benefit a person with special needs. An individual can contribute up to $15,000 a year to an ABLE account (a disabled individual can be named the beneficiary of only one account) and the first $100,000 in an account is not treated as personal assets (thereby not affecting government benefits).

How Parents of Special Needs Children Do Special Needs Planning and Estate Planning

Some parents make it a priority to focus on special needs planning, rather than retirement planning or estate planning. The truth is, all three types of planning are essential to ensure all bases are covered for you and your child with special needs.

Why Special Needs Planning is Important: If something happened to you and you are taking care of a loved one with special needs, what would happen to that person? A special needs trust is an essential tool to protect the financial future of an individual with special needs. Also known as “a supplemental needs trust,” this type of trust preserves eligibility for federal and state benefits by keeping assets out of the name of the person with special needs, while still allowing the trust funds to be used to benefit the person with special needs. Special Needs Trusts fall generally into these main categories:

• Third-Party SNTs where one person creates and funds for the benefit of someone else;
• First-Party SNTs which are created by or for the person with special needs using that person’s own money;
• Pooled trusts are an alternative to setting up your own special needs trust if you can’t come up with a good choice for trustee or if you are only putting a small amount of money into the trust. There are both third-party and first-party pooled trusts.

Learn more about Special Needs Trusts here.

Why You Need an Estate Plan for You and Your Special Needs Child: When it comes to estate planning, it’s not enough to just have money set aside for your loved one, be it in a special needs trust or an ABLE account or both. You’ll need a written plan that will specify how you’d like your family member to be cared for, should something happen to you.

Planning for a child with special needs is about your child getting the best possible care after your death or when you become unable to make decisions for your child because of your own incapacity. For children with special needs who have turned 18 and are capable of signing in capacity planning documents such as a power of attorney and an advance medical directive, it is strongly suggested that they sign these documents as soon as possible. At the Farr Law Firm, our proprietary 4-Needs Advance Medical Directive® includes our proprietary Long-term Care Directive®, an extremely detailed and comprehensive planning document which can be used in addition to, or in lieu of, a formal life care plan or letter of intent for a special needs loved one.

Special Needs Planning, Retirement Planning, and Estate Planning at the Farr Law Firm

When it comes to special needs planning, estate planning, and retirement planning, the time to start planning is now. The attorneys at the Farr Law Firm can guide you through this process. Please contact us to make an appointment for an initial consultation:

Special Needs Attorney Fairfax: 703-691-1888
Special Needs Attorney Fredericksburg: 540-479-1435
Special Needs Attorney Rockville: 301-519-8041
Special Needs Attorney DC: 202-587-2797

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.