Special-needs financial planning strategies for families

For families with special needs, financial planning is a complex and deeply personal journey. It requires a combination of compassion, experience, and careful consideration. In this article, we’ll go over some basic information as well as the financial tools you can use to help ensure the security and well-being of your loved ones.

Mother and son smiling at home

Financial strategies for special-needs families

Raising a family is no small feat, but when you have a child or adult family member with special needs, the challenges and responsibilities can be even more complex. Caring for disabled children and adults comes with emotional and financial considerations that require careful planning. Here, you’ll learn about some of the financial tools that can provide for families with special needs, helping you plan for the early years through long-term stability.


Caring for disabled children

Raising a child with special needs is a labor of love, but it can also be financially demanding. Access to specialized education and therapies can vary widely depending on your location, and many specialized services are not covered by medical insurance, which means ongoing medical expenses can quickly add up. In addition to government programs (see below), you may have access to local support groups or organizations that cater to your child's needs and provide both emotional and financial relief. Finding the right mix and schedule while a child is young can make a big difference in their long-term growth and the health of your family.


Financial strategies for disabled adults

As children with special needs grow into adulthood or a loved one develops special needs later in life, the focus of financial planning shifts. They will often need additional financial and employment support to maintain their quality of life. Here are a few things to consider:

  • Employment and income: Explore opportunities for supported employment or vocational training to help disabled adults become more self-reliant.
  • Government assistance: Use government programs that provide financial support and services to disabled adults (see below).
  • Guardianship and decision-making: Establish a legal framework (preferably before the age of majority) for decision-making if the individual with disabilities cannot make choices independently. This includes guardianship and powers of attorney.


Benefits and financial tools for people with disabilities

These benefits and tools can provide essential support while preserving eligibility for government assistance programs. By understanding the specific needs and available resources, you can create a stable financial foundation for your loved one with special needs, ensuring their well-being and security. 


Federal and state benefits

Both children and adults with disabilities can qualify for many government assistance programs, such as Social Security Disability Income (SSDI), Supplemental Security Income (SSI), Medicaid, and more. Taking advantage of these programs can make a huge difference in quality of life for both the disabled individual and their family. Unfortunately, it’s easy to accidentally do something that disqualifies you from certain assistance, such as keeping too much in a savings account belonging to the disabled individual. For this reason, understanding the rules and regulations of each benefit is vital. For the most up-to-date information on federal programs, visit the social security website.


Special-needs trusts and qualified disability trusts

Special-needs trusts are fundamental to securing the long-term financial security and well-being of individuals with disabilities. They allow for the careful management of assets and provide for essential expenses. Most importantly, by placing assets into a special-needs trust, these resources aren’t counted as personal assets when determining eligibility for government benefits as long as it is set up correctly. This means that your loved one can access both the support provided by the trust and the assistance from government programs, ensuring a comprehensive safety net.

 There are two primary categories of special-needs trusts: third-party trusts and first-party trusts. Third-party trusts are established with assets that belong to someone other than the individual with special needs, typically a parent, grandparent, or other family member. First-party trusts are funded with assets that belong to the individual with special needs, often from a legal settlement or inheritance. Both can play an important role and have different benefits and drawbacks. Learn the difference between a will, an estate, and a trust


ABLE accounts

Another way to preserve government benefits while providing supplemental support for a special-needs family member is by setting up an Achieving a Better Life Experience (ABLE) tax-advantaged savings account. Again, since most federal programs have strict income-level and asset limits, it can be difficult for adults with disabilities to save without potentially jeopardizing their support. That’s where ABLE accounts come in. A relatively new financial tool, an ABLE, or 529A, account can hold funds up to $100,000 without compromising eligibility in state or federal programs. 

 To qualify, the individual must have been diagnosed with a significant disability before the age of 26. You can open an ABLE account through your state ABLE program website. Once the account is set up, the disabled individual, their family members, and even friends can deposit money into the account and the funds in the account can be used for approved disability expenses such as housing, employment services, and transportation. Interest growth and withdrawals are both tax-free. There is an annual limit for how much can go into an ABLE account each year. That’s set at $18,000 for 2024, but there are some additional contribution-limit rules you’ll want to check out.


Special-needs estate planning strategies

Families with an adult child with special needs must wrestle with a difficult question: What happens when parents or guardians are no longer there to take care of them? Estate planning is a critical aspect of financial preparation for the future that can help alleviate many concerns. A proper plan can ensure that loved ones have the financial and emotional support they need, no matter what. Here are some components of an estate plan that you should consider including: 

  • Letter of intent: A letter of intent is a nonlegal document that provides important information about your loved one's preferences, routines, and needs. It can be a valuable resource for future caregivers.
  • Guardianship: If your child or adult with special needs is unable to make decisions independently, establish legal guardianship to ensure their interests are protected.
  • Wills and trusts: Designate who will manage assets and make decisions on behalf of your special needs family member. Create a clear plan for the distribution of assets upon your passing.

Remember to review and update your estate plan regularly to reflect changes in your family's circumstances, financial situation, and the legal landscape. If you’d like to talk with someone to help walk you through your needs and options, seek guidance from a qualified agent to make the most informed decisions. Remember, your dedication and careful planning will have a lasting impact on your family's future.

Financial strategies for special needs FAQs

An ABLE, or 529A, account offers tax-advantaged savings accounts specifically for individuals with disabilities. It helps them save while continuing to qualify for government assistance.

Custodial accounts can be cheaper to use and have fewer rules than ABLE savings accounts, but lack important features designed to preserve access to government help programs.

Yes, as long as the individual has earned income. There are some rules you will have to follow, but there is no age restriction on opening a Roth IRA.

A special-needs trust is the most common type of trust for helping families with a disabled child provide for them now and in the future.


Get help with financial and estate planning strategies for your family.

Our agents can answer questions and create a needs analysis for families with disabilities.

Neither New York Life Insurance Company (NY, NY), nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.