Financial Planning: 5 things to consider when you have a child with special needs

The current cost of raising a child from birth to 18 years in a U.S. middle-class household is estimated to be a little over $300,000, according to the U.S Department of Agriculture and the Bureau of Labor Statistics. While some costs can be anticipated and planned for, what happens when the unexpected occurs?

In 2020, Aaron and Natalie Waters and their first daughter, Ella Kate, welcomed their second daughter, Collyns Claire, into their family. As a parent and a wealth advisor with Wymer Brownlee Wealth Strategies, Aaron was acutely aware of the costs the family would face.

However, when prenatal screening tests revealed that Collyns had Down syndrome, a condition in which an individual has a partial or full extra copy of chromosome 21, he and Natalie had to start reimagining their family’s short- and long-term plans, including their finances. Based on his professional and personal experiences, Waters shares his top five tips for families as they balance the expenses of raising a child with special needs with creating joyful family memories.

1. Build a support network. This network can consist of family, friends and professionals who have a child with special needs or who have experience in associated areas. Seeking wise counsel, whether through personal relationships or professionals like financial planners, lawyers and health care advocates, can be extremely beneficial.
2. Make decisions based on your family’s needs and assets. As parents, we often have a vision for what our family’s journey will look like and make decisions based on that vision. However, becoming a family that includes a child with special needs or disabilities may require significant adjustments. Waters shares one such example: “When my wife, Natalie, decided to stay home with our children, we lost income, but we did save on daycare costs. Weighing those kinds of things is important, and they are not always easy decisions.”
3. Assess your short-term needs. Managing day-to-day finances is one of the most commonly cited challenges for families of children with special needs. It’s especially complex when the diagnosis is new. “You look at what expenses are going to be,” explains Waters. “In that moment, all of a sudden, now we weren’t just having a baby. We were looking at a NICU stay, heart surgeries and extra care that we weren’t planning on and all of those things can become very expensive. It was daunting.”Aaron and Natalie sought out resources to help with immediate needs. Waters recommends families learn about their options through state programs, for example:
   1. SoonerCare is Oklahoma’s Medicaid program, which provides coverage for health care services to vulnerable populations. SoonerCare helps cover medical costs for individuals/families who are unable to afford them and who lack access to other health insurance coverage. SoonerCare can help families manage the costs of medical, dental and vision appointments, therapies, prescriptions and more.
   2. Tax Equity and Financial Responsibility Act (TERFA) can help ease some of the financial burden associated with caring for a child with special needs, including therapies, medical equipment, copays and even transportation costs. A child must meet eligibility criteria, and then families are paired with a case manager, who helps them navigate through the process. Waters said TERFA has been a “huge help.”
4. Plan for the long term. For families of children with special needs or disabilities, future financial security may require more detailed planning. Is independent living possible? What happens if the child outlives their parents? “When you first receive a diagnosis of special needs, your mind races to all the selfish possibilities of how life is going to change,” said Waters, “including things like: will they be able to live on their own, what will our day-to-day lives look like and what will costs look like as we get her all the help she needs to thrive?” Waters recommends two areas of focus when planning long term:
   1. Create a financial independence plan. Being financially independent is “that point where you know everyone is taken care of for whatever life brings,” explains Waters. “Creating a step-by-step plan for the new ‘what if’s’ in life will help you create peace of mind knowing that everything will be OK.”
   2. Be aware of laws and programs for families of children with special needs that can provide financial peace of mind. For example: The ABLE (Achieving a Better Life Experience) Act is a federal law passed in 2014 (and adopted in Oklahoma in 2016) that allows families to save and invest money in an account specifically for children with special needs. The funds that the parent, the individual or anyone else deposits into an ABLE account can help cover medical or therapy costs, and the funds won’t affect eligibility for other income-dependent federal and state benefits. If used for eligible disability expenses, the money is tax free to the beneficiary. The 2022 Setting Every Community Up for Retirement Enhancement (SECURE 2.0) Act also includes a provision that increases the age of disability limit from 26 to 46, meaning even more families can open ABLE accounts. Special Needs Trusts (SNTs) allow individuals a way to hold and manage assets for a beneficiary while still maintaining eligibility for needs-based government benefits. An attorney must establish an SNT, and this type of trust also allows the freedom to contribute unlimited funds (unlike ABLE) for a child’s lifetime needs.
5. It’s never too early, and it’s not too late! Whether your child is a newborn, in the midst of their teenage years or an adult, the time is always right to prioritize family finances. Simple tasks such as assessing your finances each year can help families avoid surprises, enjoy a sense of security and plan activities that cultivate joy. “Our whole story is filled with twists and turns and things we never expected or thought we wanted,” said Waters, “and while it has not been easy, it has changed our lives in ways we could have never imagined. We’ve stressed over hospital stays, heart surgeries, medical bills and everything in between, but when I look back on our last few years, I quickly realize how much joy and beauty has been brought to our family because of Collyns and her diagnosis.”

Editor’s note: Wymer Brownlee Wealth Strategies is a full-service wealth management firm offering comprehensive financial services, tax and accounting services and business consulting services all under one roof.

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