What is a Special Needs Financial Plan?


According to the American College of Financial Services, 90% of special needs disability caregivers and family members admit that retirement planning for the parents is less of a priority than the financial plan of the child with a disability. What is a Special Needs Plan?  Simply put, the special needs plan involves creating two plans: one for the parent (s) and one for the child with a disability.  Because the combined financial plans take into account the needs and goals of both the parents and the adult child with a disability, there is additional complexity in producing an overall projection that works. This article describes the financial planning process for special needs families and outlines some of the complexities in creating a special needs financial plan.

General Considerations in Developing a Financial Plan

Creating a general financial plan usually involves taking into account all the family’s current assets, income, expenses, and savings as well as their future income and expenses to determine if the assets of the household are sufficient to pay for their cumulative expenses throughout their lifetime. Building this plan involves understanding the family’s goals, such as when each wage-earner plans to retire, and what expenses might be different in retirement. Estimating such expenses as future taxes is an important part of this exercise. The plan also looks at what the family’s income might be in retirement including benefits that may come from Social Security or a pension. Finally, the plan considers the regular income that can be safely derived from the investment assets owned by each parent using various investment return assumptions. Taking all these considerations together: the family’s current and future assets, income, savings, goals, and expenses, a financial plan is built. A solid financial plan also examines the risks that the family is exposed to and makes recommendations as to how these risks may be lessened.

Differences Involved in Developing a Financial Plan for Special Needs Families

As mentioned, creating a special needs financial plan involves developing a plan for both the parents and the child with a disability.  In many cases, the typical family does not include their grown children in their financial plan.  In other words, these families do not intentionally try to leave an inheritance for their children. According to Natixis, an Investor Survey, only 40% of all families plan to leave their children an inheritance. These families may leave residual assets as a gift for their loved ones, but the main priority of their plan is to ensure their assets are sufficient to cover their own needs and expenses in retirement. 

Special needs families, on the other hand, do intentionally plan to leave an inheritance for their child with a disability.  Planning for the parents alone may involve looking 30 to 40 years into the future. When the lifespan of the child is included, the combined financial plan may look out  60 to 70 years in the future. Moreover, the special needs family has to ensure that sufficient funds are passed on at the death of the parents in order to provide for their loved ones in their retirement. Adding to the complexity of the special needs plan is the need to balance the goals and finances of both the parents and the child with a disability. In addition,  careful consideration is needed to protect the assets and the public assistance benefits of the child with a disability. For example, special needs trusts are often a critical tool utilized to ensure the continuation of any public assistance benefits the child with a disability is entitled.

Finally, like the parent’s plan, all future expenses and future sources of income are considered in the creation of the child’s plan.  Future income derived from Social Security, ABLE accounts, part-time work, and funds remaining in the Special Needs Trust all are important aspects of the child’s plan.

Putting together this type of plan involves a lot of educated guesses. Ultimately the special needs plan will need to be updated regularly. Despite the complexity and the guesswork involved, the special needs financial plan provides a necessary roadmap for the family in making planning decisions now and into the future. The reward for families in creating the special needs plan is peace of mind and confidence in knowing that their loved one will be provided for in the future.

Schedule a complimentary meeting with our Financial Expert in Special Needs Planning, Barry Jamieson. 

This article was written for information purposes only and its content should not be construed by any consumer and/or prospective client as rebel Financial’s solicitation to affect, or attempt to affect transactions in securities, or the rendering of personalized investment advice for compensation. No client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from rebel Financial, or from any other investment professional. See our disclosures page for more information.


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