How to afford raising a child with disabilities

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Hanna Horvath, CFP®Managing Editor & Certified Financial Planner™Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

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Raising a child is an expensive endeavor, and financial planning can be even more complicated if you have children with disabilities. Raising a child with a disability costs more on average, and depending on their diagnosis may need care for the rest of their lives.

It costs an estimated $233,610 to raise a child to age 17, according to the U.S. Department of Agriculture. Autism Speaks, an autism advocacy organization, estimates the cost to raise a child with autism or an intellectual disability is $1.4 to $2.4 million. The more severe the disability, the more expensive the lifetime cost. But, you can financially prepare.

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How to begin financially preparing

For starters, begin preparing as soon as possible. Sit down with your partner and start mapping out a financial plan. Talking about money is something many couples don’t do, but it’s important to be on the same page.

“There’s definitely conflicting goals when a family has a child with special needs. It’s really important to be on the same page with those goals,” said Alexandria Nadworny, special needs financial planning specialist at Shepherd Financial Partners. “The first priority is to make sure the parents are financially secure.”

Estimating lifetime costs for a child depends on their disability, said Nadworny. Consult your doctor about your child’s disability and get advice about any anticipated costs.

Financial considerations may include physical or behavioral therapy, trained caregivers and assistive technology, said Valerie Paradiz, an Autism Speaks board member.

“While many insurance plans now cover these therapies, the cost of copays and deductibles can be high,” she said. “Many people with autism also have accompanying medical conditions that require ongoing care with specialists, who may or may not be in-network.”

Steps to take before the baby comes:

  1. Begin preparing for medical costs and child care. Finding the right caregiver or child care service can often take weeks, especially for a child with a disability.

  2. Anticipate a reduction in income. Children with disabilities can take a lot of work. One or both parents may need to reduce working hours or take time off to care for their child.

  3. Draft a budget. While unexpected expenses are bound to come up, one of the best ways to keep track of spending is with a spreadsheet. Get started with this downloadable family budgeting spreadsheet.

  4. Start an emergency fund. One of the easiest ways to grow personal savings is by opening a high-yield savings account. Learn more.

Steps to take after the baby is born

The parents’ next goal is to prepare their child to be as financially independent as possible, said Nadworny.

“Any amount of money they can leave for their child once they reach adulthood will help to make their life more enjoyable and have more than just the bare bones of what the government will provide,” she said.

When a child with disabilities reaches 21 or 22, they are ineligible for education services through the public school system. Some state governments offer additional vocational or educational training, said Nadworny. Adults can qualify on their own for some government assistance programs. Parents may also consider private educational institutions or communities for adults with disabilities.

Children over 18 are considered adults, and are therefore in charge of their medical decisions. Based on the child’s disability, parents may want to file for guardianship to maintain supervision over their child’s care. Nadworny recommends hiring an attorney to go over these decisions.

Government resources for children with disabilities

A number of government programs are available for children with disabilities to ease the financial burden, varying from monthly cash payments to health coverage. While government assistance programs do not completely cover the cost of care, they can help cover the basics.

Supplemental Security Income: This is a federal program administered by the Social Security Administration that provides monthly cash payments to those with disabilities. SSI pays benefits based on financial need.

Social Security Disability Insurance: Also administered by the Social Security Administration, SSDI pays benefits to anyone who has paid Social Security taxes for a certain amount of time, regardless of financial need. SSDI partially covers the disabled person’s spouse and dependents. Learn more about the program and eligibility here.

Medicaid: Children who qualify for SSI benefits are also able to receive Medicaid. We explain state-by-state requirements here. Medicaid waiver programs specifically provide care to those looking for long-term care outside an institution. Paradiz said it can take years for a spot on the waiver waiting list to open up, so families should apply as soon as possible.

Children’s Health Insurance Program: It provides comprehensive health coverage to children up to age19 in low-income households who aren't eligible for Medicaid. Requirements vary by state.

ABLE Accounts: These tax-advantaged savings accounts allow for individuals who became disabled before they turn 26 to save without hurting their eligibility to other government benefit programs. ABLE accounts are similar to 529 plans. Contributions can be made by anyone but are capped at $15,000 per year. If the ABLE account exceeds $100,000, the individual is no longer eligible for SSI.

Additional resources for parents

Parents can find additional benefits including nonprofit scholarships, online resources and other government programs via the Benefits Finder, a government site. Nadworny recommends applying for all the programs available, even if your child may not qualify. Some programs often have long wait times, so it’s smart to apply as soon as possible.

While government programs can cover basic care and expenses for a child with disabilities, personal savings will have to cover everything else.

“You don’t want your child to rely on the government for all of their support,” she said. “There’s no guarantee that these programs will last. Legislation can change. Parents should save and prepare some on their own.”

Future care planning

One of the biggest fears parents have is passing away without leaving proper care for their child. Some children with disabilities may never be able to fully support themselves and will need care for the rest of their lives. Plan ahead as soon as possible to ensure your child is taken care of.

Insurance options

If you're providing income that your child depends on, you need long-term disability insurance. Long-term disability insurance protects the parent’s ability to earn an income if they become disabled, that way your children don't lose pivotal financial protection.

“The child will be forever dependent on the parents income during their working years,” said Pat Hanzel, certified financial planner and advanced planning specialist for Policygenius. “If the parent becomes disabled they'll not only not be able to support themselves, they won't be able to support their child either.”

Getting whole life insurance may also be the best option for protecting children with disabilities after the death of a parent. As long as the premiums are paid your child can receive benefits for their lifetime. It’s recommended that parents name a custodian to the policy. The custodian can handle the funds after the parent dies.

Setting up a special needs trust

The federal government disqualifies children with disabilities from receiving government benefits if they assets worth more than $2,000. If they are the beneficiary of a life insurance policy, will or retirement account, that could put them over the limit.

The alternative is to create a trust specifically designed for beneficiaries who are disabled, known as a special needs trust. Grantors can leave specific instructions on how they want the funds to be administered, and can provide financial support to a named guardian while also allowing the beneficiary to qualify for government assistant programs.

A trust can be named as the beneficiary of a life insurance policy, or funded with other investments, like retirement plans or stocks. Learn more about future care planning for children with disabilities.

Financial planning can be overwhelming. Parents of children with disabilities may want to get professional help. Financial planners like Nadworny specialize in disabilities and are attuned to these financial challenges.

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