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Speaking From Experience: Financial Planning for Special Needs Families

The most important financial step a parent can take is to set up a special needs trust in the child’s name.

By Brooke Hawley

While every parent’s path to retirement is different, many follow a familiar pattern. You save and invest for your own financial future while setting aside funds for your child’s college tuition, and perhaps a wedding, with the notion that they will gain independence as a young adult. But as many of us know, and as I’ve seen over the last two decades in my position advising corporate retirement plans, life isn’t always so straightforward. Specifically, I’ve observed trends like people having children later in life, managing college expenses in retirement, having their adult children move back home, and raising children with special needs.

If you have a child with special needs, as I do, you face a special set of financial considerations. Above all, you want to ensure that the choices you make are in your child’s best interest both while you’re here to care for them and after you’re gone, and that these choices don’t unintentionally create other obstacles.

As it stands, having $2,000 or more in assets makes a person ineligible for certain federal benefits, like Medicaid, Social Security and some food and housing programs. So, despite your best intentions, setting up a savings account or leaving a large inheritance for your child’s ongoing care could disqualify him from critical government assistance.

With this in mind, the most important financial step that a parent in this situation can take is to set up a special needs trust in the child’s name. These trusts are designed for people with physical or mental disabilities, who can use the funds or property therein without jeopardizing any other benefits.

Even if you don’t have a lot of money to fund the trust initially, putting it in place is a crucial first step because you’ll be able to name the trust, not your child himself, as the beneficiary on other assets and accounts they might inherit.

As a next step, it’s very important for parents to draft a will and, again, to name the special needs trust rather than the child as the beneficiary. This documentation is so important, because if something should happen to you and your assets go to a probate court, a judge could award them to your child and unwittingly interfere with his eligibility for life-sustaining benefits. This concept should extend to other assets and investments, like 401(k)s, IRAs and life insurance.

In that vein, the third key step is to work on your savings. It’s a good idea for people in all circumstances to use the saving and investing tools at their disposal, including workplace 401(k) plans, as these come with cost efficiencies, tax advantages and, often, employer contributions. Parents of special needs children should also consider diversifying to ensure they have enough liquidity, in case they need to access funds for medical treatment, in-home care or the services of a disability advocate. Cash can also come in handy for things like speech and occupational therapy, which aren’t always covered by insurance.

Another savings tool has emerged in recent years to provide additional financial opportunities and flexibility for special needs families. The 2014 Achieving a Better Life Experience Act opened the door for tax-free ABLE accounts, which, similar to 529 college savings plans, allow Americans with disabilities to save and invest for the future without becoming ineligible for government benefits. The money can be withdrawn for a range of qualified expenses, from education to healthcare, and this option is open to anyone who is diagnosed with a disability before the age of 26. While these plans are only administered by certain U.S. states at the moment, many states offer plans that are open to all U.S. citizens.

It’s easy to feel overwhelmed by the challenges ahead, but parents of special needs children should know that they’re not alone. There are a range of professionals, from advocates to attorneys to financial advisors with special needs certifications, who have dedicated expertise in the kinds of programs and benefits that can help differently abled children. These professionals can, for example, help parents establish power of attorney so they can maintain a consistent level of medical and financial decision-making support once the child turns 18. They can also help with the fundamental steps of establishing a special needs trust, drafting a will with the proper designations, opening an ABLE account and structuring a savings and investing plan tailored to your unique situation.

We can also find strength in each other, taking advantage of the many online and in-person support groups that exist today. When someone has walked our path before, they can share a wealth of information on everything from care providers to educational resources—and can even just act as a source of encouragement on more challenging days. Life is full of both blessings and curveballs, and the best we can do to manage the latter is to be as informed and prepared as we can be.


Brooke Hawley is a Vice President, Financial Advisor and member of the Retirement Plan Advisors team at RBC Wealth Management – U.S. She is a mother to a 6-year-old son living with special needs.

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