Financing the Care of a Disabled Child

Financing the Care of a Disabled Child

A departure from my standard topics, but since I have a daughter with Down Syndrome, my interest is obvious.

Financing the Care of a Disabled Child
By Mohammed Hadi

The Wall Street Journal
February 4, 2007

Parents of children with severe disabilities can turn to their doctors for medical advice, their religious leaders for spiritual guidance, and their communities for encouragement.

They should also turn to a financial adviser and an attorney to create a lifeline for their child.

This is especially critical for families of children who are unlikely to be able to support themselves as adults and who may never be able to live independently.

While family needs vary widely, on average parents need to accumulate $350,000 to $400,000 to ensure that personal care will be provided for the rest of such a child’s life, says Chris Sullivan, manager of special-needs financial services for Merrill Lynch.

Mr. Sullivan’s program works with clients whose children are in “very severe situations,” such as severe cerebral palsy and severe autism. Such families need considerable savings, he says, because “it is now very common for a disabled child to live another 40 or 50, or sometimes 60 years.”

Planning for a disabled child’s future isn’t just about saving enough, though. There are also pitfalls to be avoided, and opportunities for parents to create some peace of mind for themselves.

Disabled individuals typically receive benefits from the federal and state governments in the form of Supplemental Security Income and Medicaid. Without such assistance, a family’s savings would need to be far greater. Families can use a “special needs trust” to provide additional dollars for a disabled individual’s future care without threatening those government benefits.

It’s Easy to Mess Up

But loved ones with the best of intentions can inadvertently disqualify a person for disability benefits. That’s because it takes only $2,000 in assets in the child’s name, rather than that of the trust, to lose government benefits.

“Oftentimes, unintentionally, the grandparents will make out a will that makes a direct contribution to the child,” says Mr. Sullivan. “That will create a calamity for the parents because it will automatically disqualify the child for government support.”

Despite these complications, many parents of disabled kids aren’t seeking out the proper advice, says Joyce Gordon, a vice president of the wealth strategies group at MetLife. In a 2005 survey, MetLife’s Division of Estate Planning for Special Kids found that 88% of such parents have not established a special-needs trust, and nearly a third have made no plans for how to provide for their kids after their own deaths.

Pain…But Also Comfort

Ms. Gordon speculates that parents want to put off difficult decisions — such as choosing a guardian for the child — and she notes that these tough decisions are only “compounded by all of the stress they are under.”

That said, actually making a plan — often including a letter of intent spelling out day-to-day details as simple as the child’s preferred brand of toothpaste — is “going to provide the security that they need when thinking about that child’s future,” Ms. Gordon says.

Both Merrill Lynch and MetLife offer free consultations with their special-needs financial advisers. These and other financial firms can make money charging fees to develop financial plans, managing assets in special-needs trusts, and selling life-insurance policies to provide a lump sum upon a parent’s death.

To be sure, parents trying to finance the care of their child 30 or 40 years from now have time on their side. Sometimes, what’s more difficult is finding money for immediate expenses.

“One of the problems is that when you need the money — when the child is young and you need all those extra services — you don’t have it. And when you have it, and the child is older, you don’t need it,” says Emerson Dickman, a special-needs attorney in New Jersey whose son was born with Down syndrome.

Mr. Dickman recently created a group, the Dickman Consulting Alliance, to provide parents and others with resources on special needs.

Ask For Help

What can hard-pressed young parents do to meet their immediate financial needs? Mr. Dickman offers a suggestion from his own experience: Ask for help.

Mr. Dickman says he and his wife “didn’t have enough money for the speech lessons that my son needed.” So he asked a local fraternal organization to pitch in.

“We asked for charity because when you have a child with a disability, you do things for them that you would not do for yourself,” he says. “And that’s what these groups are there for. They want to help.”

It’s a better option than jeopardizing your financial security.

“We have families who sell their houses, who take out second mortgages or cash in IRAs to pay for their children’s therapy,” says Alison Singer, senior vice president at Autism Speaks, a group that raises funds for research and advocates for autistic children.

Ms. Singer, whose 9-year-old daughter is autistic, notes that therapy for autism, which can cost thousands of dollars a week, isn’t typically covered by insurance. “When parents have a child that is diagnosed with autism, it’s a double whammy,” she says. “First, they are hit with all of the emotional issues associated with having a child with disabilities and then they are told that they have to pay for the treatment themselves.”

A little research might turn up some unexpected sources of funds, though. The state of New Jersey, for example, has a program called the Catastrophic Illness in Children Relief Fund that helps families foot medical bills.

The New Jersey program gives away about $8 million a year and the awards are based on financial need, says executive director Ralph Condo. (Go online to nj.gov/humanservices¹ and click on “Disability Programs.”)

The fund is unique to New Jersey, Mr. Condo says, but other states and the federal government have expressed interest in creating similar programs.