Tuesday, March 6, 2012

Myths and realities about financial planning for kids with special needs


Planning for the financial future of kids with special needs can be really overwhelming, not to mention perplexing. I don't know about you but financial anything is not one of my strengths, let alone the kind that involves making sure Max is taken care of as an adult. One word: eeep.

I'm glad to be working with Massachusetts Mutual Life Insurance Company (MassMutual) on a series of sponsored posts about planning, for my sake and yours. The following super-helpful (and very reassuring!) info is from Sal Salvo, a financial pro with MassMutual who is a SpecialCare planner. Experts in the program get advanced training on estate and tax planning, and also learn how to help parents and family cope with the emotional side of planning.

Sal has an adult daughter with Rett syndrome; he got involved in planning soon after she was diagnosed. "At the time, I did it for selfish reasons, so I could better know what I could do for my daughter," he says. "The emotional impact of having a child with special needs can be rough—it takes you out of the logic of planning." Here, he shares common misconceptions parents have about special needs planning, and some key reality checks.

The misconception: "I can just put money away into a special savings account for my child, maybe other family members will help out."
The reality: "If a child has more than $2000 in savings in their name, you will forfeit benefits that child is entitled to once they turn 21. They won't qualify for Medicaid, the program that entitles people with disabilities to housing, transportation, day programs, aides and medical care. Every state has different programs and services, but it's a maze you have to get through. Still, you do not want to have any savings in a child's name—that's why you set up what's called a special needs trust. You become a 'trustee' who can supplement care for a special needs child and make sure the child has a good life, without forfeiting government benefits. For example, a client came in who had a niece in Texas, and he'd left a large amount of money to her. I asked him why he'd selected her and he said, 'She's got autism.' Turns out he hadn't told his brother he had done this—and it could have messed up her benefits. We set up a special needs trust."

The misconception: "I can't afford to do special needs planning."
The reality: "Not all financial services professionals charge fees. And for those who do, fees can vary by region; in more expensive urban areas, such as New York, financial planning fees can start at $2000. That said, money shouldn't be a roadblock to preventing you from meeting with an expert—there's always someone who will be willing to work with you. Some professionals who charge fees may negotiate their price based on family need, for example. Many planners do a complimentary meeting first to lay out costs, and hear what your concerns might be. Just realize that anyone who does special needs planning has to have a predisposition to helping people."

The misconception: "If I already have a will and special needs trust, we're good."
The reality: "Parents get so focused on caring for their special needs child, they forget about themselves. But you must have money for your retirement. It's like that old parable of how when you're on a plane and the flight attendants go through safety procedures, they tell you to first put the oxygen mask on yourself in case of an emergency, then on your child. It's the same with planning for your retirement when you have a kid with special needs. You need to think about planning for two generations, you and your child. Problem is, when you get a diagnosis, you can be in denial. It can take a long time to come to grips to fact that child won't be 'typical,' a tough pill to swallow—for me, it was. When it comes to general planning for your financial future, time is your friend. Start early and it won't be overwhelming."

The misconception: "My child won't need long-term care."
The reality: "You just don't know, so it's best to plan for that scenario. You don't want to delay; when I was trying to get my daughter, then 18, into a residential program before she turned 21, it was a race against the clock. A lot of the places that would accept her were like glorified kennels. So many states have long, long wait lists for residential care and day programs. If you haven't provided for your child and they need care, they could wind up in an inferior facility. If you have a trust, however, you can supplement Medicaid—and also come up with alternate options, like pooling money with other families to purchase a house for your adult kids and hiring aides. And if your child doesn't need that care? If the trust is written properly, the money can be used for big-ticket items like college and buying a house."

The misconception: "I just can't deal with special needs planning right now, I've got too much else to worry about."
The reality: "Having an experienced financial services professional help you plan for the future will give you peace of mind—not only in finances but in other areas, too. We tend to know about great resources in the area, like support groups. I wish I had someone helping me in the early stages—I was like a ping-pong ball, between the emotional ups and downs, the stress of figuring out what was wrong, getting the necessary help and dealing with physicians and educational processes. But you don't necessarily have to be the one in charge here. Moms are often the ones who end up having to keep things together. Get your husbands involved."

This is one of a series of posts sponsored by MassMutual, for which I received compensation. SpecialCare is an exclusive MassMutual program that provides access to information, specialists and financial products and services.

14 comments:

  1. I shared this post on my blog, linking back to you. I found this really helpful and will be having my husband read this, and the future posts on this topic. It is something we have been discussing much more lately. Do they discuss 529 college plans?

    Here is the link for my post(sharing your post)If there is anything in it that you don't like/needs to be changed let me know.

    http://kennedyandzach.blogspot.com/2012/03/thanks-love-that-max-for-helpful.html

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  2. Great post! And will share. This is on my to do list...but it needs to be a priority.

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  3. My husband and I are working with a financial planning company in Dallas whose founder has a daughter with special needs: http://www.txlifeplanning.com/
    (not that I want to spam your blog with links, but this one I will shout from the rooftops!)

    Best. Decision. Ever. They don't just give you 'good advice', it's CRUCIAL information.

    In fact, we met with a lawyer just yesterday to sign our wills and establish a trust for our daughter.

    It's a daunting process and it's definitely emotional, but the peace of mind is worth it.

    We are also taking guardianship of our daughter. It's a personal choice, but one that parents of special needs kids/teens/young adults need to consider also.

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  4. That $2000 limit isn't just for kids who are turning 21.

    If there's any chance your child will qualify for medicaid, whether through a waiver program for medically fragile children or through a parent losing their job, that limit is still there.

    We were granted a medicaid waiver for my son because of his medical needs, but still ran up against the savings limit, because what the waiver meant was that *our* income and assets didn't count, but his still did.

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  5. Thank you for writing about this topic. It is an important issue to address. We still need to write our will and trust. It's intimidating (and expensive) but I know I will feel much better afterwards.

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  6. I was just wondering about the family who was racing to get the child a placement before age 21. I have a severely disabled son who very likely may need residential placement at some point - we are going to hold off as long as possible. WHat changes at 21 i terms of finding placement? I know the kids are handled by the school district until 21. do the actual choices change then? DOes anyone know?

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  7. Emma- My daughter is 21. There is nothing I can think of that changes at 21 except the schooling situation. My daughter will go the rest of this year and is elligible for one more year of public school. We are currently looking into job, volunteer and day program possibilities for her when school is over. I'm not sure why the parents were 'racing'. In Texas, money for a placement (the HCS list) takes f-o-r-e-v-e-r to get (15 year waiting list).

    Legally, a lot changes at 18. We found out the hard way when my daughter needed an MRI. She was 18 and we could not give consent. She did not fully comprehend the procedure and could not give consent for herself. The hospital had to convene an impromptu medical ethics board to make a decision (they allowed it since both parents were present and in agreement).

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  8. This is a wonderful blog and today's topic is so important...a big understatement. So much like a rollercoaster ride - you get a good idea about planning and then bam! back to reality, there's a hitch. My special needs granddaughter is continually denied help for therapies due to her parents' income. FYI they are not rich but both work. Again, financial planning is crucial, but she's 2 and needs help now. So frustrating.

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  9. This is such a well done post on a hugely important topic. There are so many reasons why everyone should take the time to figure this stuff out now!

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  10. So glad this was helpful; I learned a lot from Sal, too.

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  11. Wonderful blog - I will be a regular visitor. Here in Canada, we are fortunate to have relatively recent legislation that created the RDSP - Register Disability Savings Plan. I know this is specific to Canada, but it may give you a model to reference should you start the lobbying process with US law makers. The plan was only created after many years of such advocacy up here. A good resource for information is www.plan.ca - the advocacy network started by the very individuals that worked tirelessly to see that legislation become a reality. In short we can put money into a long term investment plan that does not affect the day to day savings/income activity of the beneficiary of the plan. With modest contributions our 23 year old son should have a more than reasonable fund to draw from after we are no longer there for support.

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  12. Wonderful blog - I will be a regular visitor. Here in Canada, we are fortunate to have relatively recent legislation that created the RDSP - Register Disability Savings Plan. I know this is specific to Canada, but it may give you a model to reference should you start the lobbying process with US law makers. The plan was only created after many years of such advocacy up here. A good resource for information is www.plan.ca - the advocacy network started by the very individuals that worked tirelessly to see that legislation become a reality. In short we can put money into a long term investment plan that does not affect the day to day savings/income activity of the beneficiary of the plan. With modest contributions our 23 year old son should have a more than reasonable fund to draw from after we are no longer there for support.

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  13. Thank you for this wonderful information! We featured this post today on Williams Syndrome Initiatives-Vanderbilt Kennedy Center & Prader-Willi Syndrome Initiatives-Vanderbilt Kennedy Center. Come check us out at: http://www.facebook.com/VanderbiltWS & http://www.facebook.com/VanderbiltPWS

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  14. I am rather disgusted that at a time when most states are going bankrupt due to people scamming Medicaid and Medicare that you are not only promoting but advertising hiding your kid's money in trust accounts so that they can still qualify for state funded programs they would NOT otherwise qualify for!

    Fraud is fraud - regardless of whether it is tied up with a pretty bow and labelled a "trust"

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Thanks for sharing!