Yesterday, I had the pleasure of meeting another prospective client family. An initial meeting is the time for the clients to tell me what they want to accomplish and for me to tell the clients how I work. Because I focus my practice on families that have a member with a disability, prospective clients often put a of emphasis on that aspect of their family life. Once I acknowledge what I can and will do to help them plan for the future of that family member with a disability, I go on to broaden the conversation to ask about the rest of the family member and their goals.
Parents and siblings are and, in most cases, remain the most important pillars of support for the family member with a disability. They are the ones who assist with executive functioning, managing, or helping the person with a disability to manage health care, finances, etc. Often, it is parents and siblings who most directly support the person with a disability to make and sustain friendships and community memberships and to find a job and recreational activities. If the family member with a disability does not live with her/his parents or sibling(s), then chances are that the parents and siblings have had a key role in finding the place where the person does live now and in putting in place the support services that the person needs. Whether formally as guardians/conservators or agents under powers of attorney or informally as close family members, they are generally the ones to whom the person with a disability turns when faced with a major decision. Because they are busy, helping out in the life of the family member with a disability, parents and siblings often minimize or delay their own future planning (whether financial or otherwise). Yet, it is precisely because of the crucial role that they play, those parents and siblings should do the planning they need to have confidence in their own financial futures. To draw upon a somewhat overused comparison, each person needs to get her/his own airplane oxygen mask on and functioning if they are to be of any effective assistance to anyone else (including helping the other with her/his own mask). So, the first reason for planning for the family as a whole is to make sure that caregivers have the long-term physical, emotional and financial stability, and health that they need to sustain their generous support work. (photo by Nathan Anderson via Unsplash ).
The second reason to plan for the family as a whole is that some future contingencies with financial consequences have some “either/or” qualities to them and, as a result, it can be cost effective to find a financial strategy that can accommodate multiple possible outcomes. One such situation is the parents’ own potential future need for long-term care. The mother might need to use family resources to pay for long-term care or the father might, or both might or, in the best-case scenario, neither will. An effective way to plan for this uncertainty is to use a hybrid (meaning life and long-term care insurance in one policy) shared-care, long-term care coverage. If only one parent has a need for long-term care, then s/he has access to the whole pool of funding. If either parent has a sustained long-term care need, s/he can both use her/his own coverage and also some of the spouse’s. If the long-term care needs are shorter than expected or if neither parent has one at all, then the policy’s life insurance death benefit can become and additional legacy to the heirs, including a special needs trust for the benefit of the family member with a disability. Of course, it is important to remember that since the policy may be needed to fund long-term care, it cannot be the only source of funding the special needs trust.
Depending on the age of the children at the time financial planning is initiated, future college needs can also be an uncertainty. A child without a disability may decide not to pursue post-secondary education or may be awarded a scholarship to cover some of the cost. A child with a disability may prove suitable for and become interested in one of the increasing numbers of post-secondary programs, designed for youth with disabilities and, depending on the nature of the program, may or may not be eligible for any financial aid. It may make sense to fund the 529 college saving plan only partially for any one child, knowing that if one child receives a scholarship, a sibling or another close family member can be named the new beneficiary of the account, un- or under-used by the scholarship awardee. With regard to the child with a disability, you could fund a 529 plan up until the age it becomes clear whether or not post-secondary education will be suitable for the child with a disability and, if it is not to be so, begin to roll those funds to a 529A (ABLE) account. Of course, you might begin to fund an ABLE, right from the beginning, knowing that the funds could be used to cover future post-secondary education as needed, but also used for other expenses.
The possibilities of the parents’ premature disability or death also present uncertainties that could impact the whole family, even if either would have the most significant impact on the family member with a disability. Supporting a family member with a disability sometimes raises overall household expenses. As a result, the premature disability or death of either wage earner may be an even more serious concern for a family in this situation than for others and may continue as a risk for longer since the child with a disability may rely on the parents’ financial assistance for a longer time than children with more typical development. On the other hand, the child with a disability may qualify for certain public benefits as s/he goes through life. To balance the cost and benefit of both long-term disability insurance and life insurance for the parents, the family needs to consider how much parental support each child will need and for how long. They can then estimate not only how much insurance the parents will need when they are providing total support for their children, but also how to taper down that insurance coverage as each child grows in independence.
The question of when each parent should file for their Social Security retirement benefits also becomes very much a family calculation when the family includes as least one child who will qualify for so-called “Childhood Disability Benefits” (“CDB” also known as “Disabled Adult Child” or “DAC”) benefits, based on the parent’s work record. In this situation, a parent, who files early, gets a reduced benefit for her/himself, but also earlier access to the CDB and related Medicare benefits for the adult child with a disability. A parent, who delays filing, will build up a larger benefit for her/himself (and for a future spousal widow/widower) but also delay the date at which the adult child with a disability can collect CDB and have access to Medicare. It is a good idea for the family to run multiple calculations to determine which filing strategy might produce the maximum amount for the family as a whole.
When we use the term “Special Needs Planning”, we do not mean that the person with a disability has “special needs”. Rather it is for the family that needs special attention within their financially planning process with the added complexities that come when one or more members may have additional requirements for support as well as access to specific public benefits with complicated rules. To plan well, we must consider how the future financial needs of each family member are interdependent with those of the other family members. This way, we can maximize the family resources for all members.