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A Primer on Financial Planning for Families with Special Needs

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special needs financial planning

Special Needs Financial Planning

Todd Sensing, CFA, CFP



special needs financial planning 1
Special Needs Financial Planning
  • Essential Items of a Special Needs Financial Plan
  • Common Pitfalls of Special Needs Planning
  • Transitioning to Adulthood
  • ABLE Accounts
  • How to Buy Insurance Without Lining the Pockets of the Agent
  • National Defense Authorization Act For Fiscal Year 2014


essential items of a special needs financial plan
Essential Items of a Special Needs Financial Plan
  • Prepare a guide for the care of your loved one with special needs

A LOI is the non-legal document created by you

  • Surround your Family with advocates and fiduciaries
  • Get registered for all of the services and benefits you are entitled to receive – Register - http://apd.myflorida.com/customers/waitlist/
  • Use a supplemental Needs Trust Rather than disinheriting
  • Carefully choose the guardian, trustee, and future care giver

Consider the skills necessary and do not assume that the closest relative is the best choice

essential items of a special needs financial plan 1
Essential Items of a Special Needs Financial Plan
  • Review Beneficiary designations and account titles – proper naming is essential
  • Coordinate your planning with your relatives planning – Make sure everyone understands your plan
  • Assume that housing and employment will be significant challenges and begin planning ASAP
  • Create a safety plan that focuses on the challenges of your child in the case of an emergency (practice for fires, hurricanes, etc.)
  • Seek Community – Airplane rule – respite, communication, etc..
assuming the same family member should

Assuming the same family member should be the executor, trustee, and guardian. You need the right people for the right role. The best solution may be three different people and some more than likely professionals

  • Purchasing term life insurance to fund the special needs trust
  • Drafting the special needs trust so that it is implemented upon the death of the second parent
  • Funding 529 Plans or other college savings plans in the name of the child with special needs (Not ABLE)
  • Ignoring federal and state benefits – regardless of wealth this is the ultimate safety net and the ability to access programs only available to children that meet the eligibility requirements
  • Common Mistakes
failing to plan for assets to go into a special

Failing to plan for assets to go into a special needs trust at the parents death

  • Not communicating with extended family members
  • Failing to have an LOI
  • Parents neglecting themselves in an effort to provide for the child
  • Overlooking the most important things!
  • Common Mistakes
a maximum of 14 000 per year can be contributed

A maximum of $14,000 per year can be contributed to an ABLE account

  • The funds in the account are to be used for disability-related expenses only
  • A disabled individual can be named the beneficiary of only one ABLE account
  • The person who is named the beneficiary would have had to be blind or disabled before age 26 to qualify
  • Post tax savings with earnings that are tax-free if used for ‘qualified expenses’
  • $100,000 Savings do not count as assets for SSI/Medicaid
  • Medicaid payback provision
  • Relatively new (2014) Changes are possible
  • http://www.ablenrc.org/state_compare
  • ABLE 529
transitioning to adulthood
Transitioning to Adulthood
  • Start planning as soon as possible – schools start @ 14 - start earlier
  • Focus on transitioning skills in IEPs
  • Determine if guardianship is appropriate
  • Find a good attorney that specializes in special needs
  • Evaluate post-secondary or vocational education opportunities
  • Ensure eligibility for government programs – Medicaid eligibility makes more programs available to you
  • Expect SSI or SSDI applications to take longer than expected
  • Be realistic when discussing abilities in this process
able accounts
ABLE Accounts
  • What is an ABLE account?
  • A tax-advantaged savings account for individuals with disabilities and their families. The beneficiary of the account is the account owner, and income earned by the account will not be taxed.
  • Why do we need ABLE accounts?
  • Individuals with disabilities rely on a wide variety of public benefits for income, housing, and food. To remain eligible for these, an individual must maintain less than $2,000 in savings. Finally, the ABLE Act recognizes the significant extra cost of living with a disability.
  • Who is eligible? Onset of said disability must be before age 26. If already qualified for SSI/SSDI you are automatically eligible. If not, the individual can still be eligible if they meet SS definition of having significant functional limitations.
  • What are the limits on contributions? $14,000 is the maximum.
  • For more information: www.ablenrc.org


how to buy insurance without lining the pockets of the agent
How to Buy Insurance Without Lining the Pockets of the Agent
  • Permanent needs require permanent insurance
  • Permanent insurance can be expensive…
how to buy insurance without lining the pockets of the agent 1
How to Buy Insurance Without Lining the Pockets of the Agent
  • But wait-- there is Blended Whole Life (BWL) & Universal Life (UL) (Higher Premium as low as 3% commission)
  • When given the choice of selling a lower or higher commission policy, where is the incentive to sell the low cost policy?
  • Independent fiduciary advice
source insider trading in the life insurance

Source: Insider Trading In The Life Insurance Market: A Smart Buyers Guide Hinners, Chuck 2016

national defense authorization act for fiscal year 2014
National Defense Authorization Act For Fiscal Year 2014
  • (Sec. 643) Allows for payment of a Survivor Benefit Plan annuity to a special needs trust established for the sole benefit of a dependent child who is incapable of self-support due to mental or physical incapacity
  • Survivor Benefit Plan (SBP) – At retirement, full basic SBP for spouse and children
    • Full Coverage 55% of retired pay (Or lesser if elected)
    • Children mentally or physically incapable of self support remain eligible, while unmarried, for as long as the incapacitation exists
    • Special needs trusts requires a special needs trust