A study by the U.S. Census reveals that over 3 million children have a disability, about 4.3% of the under-18 population, and it’s estimated that one in five households is caring for a child with special needs. The number is growing because of changes in diagnostic criteria; for example, the prevalence of autism is now one in every 68 children, an increase driven by greater awareness of the autism spectrum.
More than ever, it’s important for CPAs and financial planners to ask their clients about the presence of a child with special needs in the family because many of their parents are worried about securing their child’s future during their retirement and after their death.
At my firm, Protected Tomorrows in Lincolnshire, Illinois, we specialize in assisting such families. To me, it’s a personal mission. My sister, Marcia, who was born with cerebral palsy, changed my life forever. I saw first-hand the difficulties our parents had in making sure Marcia would be cared for when they could no longer do so. Our mission is to provide each family hope and a coach who can guide their family through the uncertainty they will face.
Over the years, I’ve developed eight steps to future care planning, addressing all aspects of life including legal considerations, potential government benefits, transition planning, residential options, employment opportunities, recreational choices, investment solutions and family communication. At every step, we focus on a client’s abilities, not disabilities.
Step one: I’ve found that many families are, at first, hesitant to share their stories, so it’s important to ask the right questions: Do you have a child with special needs, or a child who will need more financial support than their siblings in the future? What is the child’s disability? What are their unique gifts and talents? What are your dreams for their future, and what are your fears? What is the best thing that could happen for their future?
The answers you receive will serve as the foundation for forward-planning.
Step two: Identify the potential life needs of the individual with special needs, including quality of life, medical needs, education and recreation, based on their ability to support themselves. This step helps quantify medical expense deductions, identify tax returns to be filed, and clarify other expenses not yet accounted for.
Step three: Guide the family toward discussions about legal considerations, including wills, powers-of-attorney, trusts and guardianships. It’s common for families to delay this step because no one likes thinking about death, but the decisions made today — as daunting as they seem — can ensure greater protection for the individual with special needs. They should retain an attorney who is knowledgeable about such details as special needs trusts and guardianships. It is critical to understand how the taxation of these trusts are handled into the future.
Step four: Capture all the benefits the individual will be eligible for. The professional’s role in helping the individual maintain their eligibility for programs such as Supplemental Security Income and Medicaid can be important to the maintenance of those valuable benefits. Questions to be asked here include whether the individual with special needs has health insurance through an employer or parent employer, whether the individual holds assets in their name, and whether there’s a possibility of an inheritance.
Step five: Document, document, document. A family with an individual with special needs spends much of its time finding resources, building self-esteem, joining support groups and keeping life stable and safe for that person. Although parents and caregivers have much of this information in their heads, it is critical to the future quality of life of the loved one that they record important information in writing (referred to as a “letter of intent”). Parents often struggle with giving that responsibility to other family members, so building the support team is critical to confidence.
Step six: Help the family plan for what happens when the individual with special needs ages out of state-supported education and has to find a place to live, work and play. When the “bus stops coming”, the family often realizes for the first time that the planning is now up to them. The amount of research necessary to find the right programs can be overwhelming. The key for CPAs is to have access to information through a network of professionals to share important information with families.
Step seven: Fund the future. A CPA can help a client make wise decisions today that will be beneficial in the future. For example, If the plan dictates that a certain amount of money is needed for the lifetime of the individual, how are these funds to be obtained? Will the government provide all the necessary funding? Can the family fund the special needs trust with a large enough inheritance? Should life insurance be purchased, and who should be the policy owner? Having a defined plan to fund the future provides the family peace of mind.
Step eight: Like all estate plans, planning for an individual with special needs is not a one-and-done. Families require regular reviews to understand the changes that may occur. New legislation may be enacted that impacts their plans, or a program may be discontinued.
Families of individuals with special needs spend a great deal of time delivering care and finding resources to help them care for their loved one. It’s often hard for them to step back and consider the future. Their CPA can and should offer the knowledge and guidance they need.
