Special Edition article printed in the Central New York Business Journal in the June 15th, 2020 weekly edition.
For nearly twenty years, I have had the privilege to help many families with their wealth management needs. Many financial plans have common components, such as wealth accumulation planning, but each plan requires individual attention and a customized strategy. Not every family has children so maybe college education planning does not apply. One aspect of planning that many people do not automatically anticipate is special needs planning. It is a unique and complex area of wealth management to navigate because, unlike other parts of practice, special need planning presents a fluid continuum throughout the course of a lifetime.
If you have a loved one with special needs, whether it is a physical, intellectual, or developmental disability, it is common that people are not prepared to be facing the challenges that they have found thrust upon them. In some cases, families are aware of a prenatal diagnosis, such as Down Syndrome, and can give thought to the needs of their child ahead of their arrival. Other disabilities are invisible, such as autism, and a diagnosis presents sometime after birth. In either scenario, there are hard realities that families must face when caring and planning for a person with special needs, and that go beyond the everyday tasks and medical considerations that present immediately.
Consider this – if a financial advisor told you that navigating the continuum of special needs planning is much like driving and following traffic lights, what would you think? I use this analogy often since as a family, you have to keep moving forward, but there are certain things that you must consider (red). There are some planning items that will come into play along the road and give you cause to slow down (yellow). Then there are planning items you may need to consider down the road, but for now you just keep on driving because they may not come into play at all (green). There may be flashing yellow arrows that you see from time to time, and although it is a complex topic and area of practice, it is much simpler to compartmentalize when we look at it in those three categories.
Think of the stop light in terms of life stages. Red would be as soon as you learn of your special needs circumstance, yellow as you are raising your child or loved one throughout their growing years, and green for post-secondary education and adulthood. Today this is how many agencies are providing support and services to those with special needs. Life-centered planning has become a popular term in recent years as the needs of people change depending on their stage of life. Special needs planning from a wealth management perspective can be approached the same way.
So, where do you start? With the “must-do’s”, and the major topic here is with your estate plan. It doesn’t matter if you think you have a sizable estate or not, it is critically important for you to have your legal documents in place to protect your family and, in particular, your loved one with a disability. Many younger couples have some savings, maybe a house or some level of insurance coverage in place, but often do not have wills. If you have a child with a disability and do not have the proper estate planning mechanisms in place, it could be catastrophic to that child. Individuals with disabilities are only allowed to have limited resources in their name or they can become disqualified for important public benefits. It is critical to work with an estate planning attorney well versed in supplemental needs trusts to make sure your child is protected. An attorney would guide you based on your situation, but the cost of not having this place is far greater than any extra expense you might pay to have your plan completed, updated, or modified to conform to your situation.
Along the road, there are other planning items that may come into play that you will likely hear about or encounter. It is important to note that not all children who have a disability are automatically entitled to public assistance or benefits, and without these benefits it can become a costly proposition for any family who may have to pay out of pocket for care. There are certain diagnoses that will automatically qualify a person for benefits, but the list is a short one and there are many people who need to seek out those programs and apply for them. Resources for medical and health related expenses are often covered by state Medicaid programs once approved, and in New York State a child with a disability must be deemed eligible and recertify periodically before they become permanently eligible for these state benefits. The process to obtain the certification is a cumbersome one that will involve a lot of paperwork and assistance from your advisor, a care coordinator though a person-centered planning agency, or some combination of the two. Once your child or loved one becomes eligible for benefits, it is important to note that as a family you have a choice to utilize waiver-based services or have a self-directed budget. A self-directed budget will allow you to utilize the resources allocated for your child, which are determined based on disability and needs, to create a customized plan specifically for your child as opposed to simply selecting general programs and services.
The other major consideration that comes in the middle stage of special needs planning is educational needs. Again, not all children fit into the same education model, but every child is entitled to a free and appropriate public education. There are many situations that arise when a child has extraordinary educational needs or services, and this sometimes results in displacement from their educational setting. This can put a huge financial burden on any family in terms of potential costs for additional resources or supports, private tuition at a specialized school, or legal expenses if you find you are in an untenable disagreement with your educational team. If you have a child with a disability you have automatically added advocacy to your resume, and you will want to prepare for the potential expenses associated with the educational needs of your child.
As with any child, the natural transition to adulthood happens when your child graduates from high school. Many kids go on to college and others may seek out vocational or trade programs. There are many students with disabilities that go on to be successful with the proper supports in post-secondary school or employment. But what happens if this is not an option for your loved one? And what if your child is not yet able, or would be unable, to live independently? That’s were attorneys come back into play. There are two routes that families can look at from this point forward. One is that a family may continue to support a person until than can achieve independence, service-based or not. The other is that the person with the disability will continue to need substantial support and guardianship needs to be considered. Guardianship is a court process whereby an adult is given legal responsibility for another person after they turn the age of 18.. At this point you may also have extended family discussions about who will care for your loved one when you pass away. Do you have resources available for their care for their lifetime? Does it make sense to fund a supplemental needs trust and start saving more or retain insurance coverage? Even if you decide that your child may be independent at some point and you do not consider guardianship, you definitely want to have powers of attorney and health care proxies prepared and executed if your child can consent to those documents. If they were in a car accident, as an example, and you needed to make medical decisions, you would not be able to do so without these tools in place.
As with any course or map, there will be twists and turns along the way (with the changing colors of traffic signals), and circumstances that will present uniquely to each family situation. The cost for caring for a person with a disability over their lifetime is staggering, and with life expectancy increasing this cost will only continue to rise. The earlier you begin to plan with an advisor that can help coordinate and build a team that can help you, the better you will be positioned to address each phase with clarity and focus. Consult with the parties on your team frequently to ensure that you are current and up to date with the everchanging legal and financial factors that may come into play, and most importantly, talk to your advisor and make sure the funding decisions are not left for those you leave behind and that your plan is shored up for the future.
Iris Buczkowski is the founder of Birch Wealth Management (birchwealth.com). She is also the parent of a child with a developmental disability and has personal experience with many components of special needs planning. Original content provided by Iris is for educational purposes only and should not be construed as investment advice.