Preparing Financially for a Special Needs Child

Print viewPrint view

Caring for a special needs child is one of the most rewarding things a parent can do. As difficult as it may be at times, the rewards know no bounds. However, you must address the financial realities of special needs children so that you can protect them while they are young and so that they are cared for when you are no longer here.

Financial Challenges of Special Needs Children reports that the average cost of raising a child to the age of 18 is $250,000. If you have a special needs child, those costs can easily exceed that amount.

With that in mind, it is even more critical for parents of special needs children to come up with an effective financial plan that will protect their children’s interests now, and in the future.

The following steps will help you prepare for the financial realities of raising a special needs child without greater financial confidence.

Preparing Them for Adulthood

One of the most important things you can do to prepare a special needs child for adulthood is to establish a “Special Needs Trust” for your child. In some instances, families raising special needs children qualify for some assistance from the government, with stipulations and certain financial limitations. Creating this trust allows you to put savings, financial gifts, and any insurance settlements away to provide a financial future for your child.

It is important to put these funds into a trust so that the money is held secure for your child’s future without jeopardizing your child’s eligibility for federal benefits that help with the costs of their care.

Building a savings trust is the foundation for any long-term plans you make for your child. Even if you do not have funds to invest in the trust now, create the fund, and invest a little at a time over the years (and encourage others to make gifts to the fund too). It can become the cornerstone of the financial provisions you leave behind to generate income for a special needs adult who may be unable to provide for him or herself.

Arranging Care When You are Gone

Make sure to create a will. Many special needs individuals have conditions that allow them to live long lives – meaning your child will likely outlive both parents. It's a good idea to have a plan in place to provide care for your child when you are no longer there to do so.

That includes designating a guardian for your child. When your child is young, this is the person who will provide direct care for your child while also making financial and medical decisions on behalf of your child.

The other person you need to designate in your will is the trustee who will be responsible for managing the funds of the trust so that your child has financial protection. The trustee will also determine investment choices so it is important to choose someone who can make sound investing decisions.

Make Wise Investments

An investment in life insurance will provide financial assistance to your child if something happens to either or both parents.

Additionally, consider investments that provide easy liquidity and that can generate income. This includes things like real estate, which can generate rent and stocks that pay dividends.

The key is to start making plans now to safeguard your special needs child now and as he or she becomes an adult who still needs specialized care and financial support. These steps will help you get started on the right foot.

Member FDIC