Five Common Mistakes to Avoid When Financially Planning for Your Family With Special Needs
Thursday, June 26th, 2014
If there is one thing that the staff of M&L wants our clients, readers, and the general public to know, it is this: information is the most essential tool to any successful financial or life plan. Providing information and advice to those looking to secure successful futures for their families with special needs is our life-blood; it is why this company was founded, it is why we operate, and it is why we write this blog.
With this in mind, we want to quickly reiterate: please feel free to share this blog with your friends, family, co-workers, and anyone who you feel may benefit from the information published within. We choose our topics carefully, with an eye for what is relevant in the special needs community, and with the goal of providing excellent advice as to how to navigate each step of your special needs journey. As well, if you have a question or a topic which you would like to see addressed in a weekly blog post please do not hesitate to let us know! If you would like to know how to ensure that your question gets answered, please visit this blog in our archive for more instructions.
Now, on to today’s topic: Last week, we published a blog on a fairly complicated topic: the best ways to save for the future college expenses of your child with special needs. As we wrote that blog, we found ourselves cautioning our readers to consult with financial experts before beginning any financial savings plan. We recommend caution and professional help for one simple reason: throughout our careers as special needs financial planners, we have seen (time and time again) how well-meaning family members, friends, and financial professionals who aren’t familiar with special needs finances have advised families to make financial moves that jeopardize the individual with disabilities’ federal/state benefit eligibility.
As we discussed this amongst ourselves, we were inspired. What if we wrote a blog that didn’t focus on the financial moves to make, rather it focused on common financial mistakes that you should avoid? We all thought it sounded like a good idea. So, here it is! We have a compiled a list of five common mistakes to avoid when planning for the financial future of your family member with special needs. We hope that it helps!
Mistake #1: Waiting too Long to Start Planning
Over the last few weeks the media (both social and traditional) has been widely reporting on the incredible expenses associated with raising a child with special needs. There are two articles that we have noticed specifically which really put the issue into perspective: the first, published on time.com/money, is called Paying for My Special Needs Child. This is an incredibly realistic look at the effect the expenses associated with caring for a child with a disability can have on a family’s finances. The second article which we found extremely enlightening, “Autism Costs May Top 2 Million Per Person”, was published on disabilityscoop.com and discussed a study which found that the costs of raising/caring a child with ASD can reach 1.4 million – and if that individual also has an intellectual disability, those costs can skyrocket to 2.4 million. We highly recommend that everyone read both of these articles.
In light of this information, we would like to discuss the first common mistake that people make when financially planning for children with special needs: they wait too long! While we certainly understand why people often put off financial planning – we are personally experienced with the way that day to day challenges can consume your existence – it is important to realize that not completing these plans now can cost you in the long run. Remember: compound interest is your friend, and that friendship becomes more valuable the more time you invest in it.
So, how do you avoid the mistake of not starting to save early enough? That is simple – start saving immediately! Saving for the future of a child with special needs can often be more complicated that the standard “cut out a few fast food meals a week and transfer that money to a savings account”. It will likely require the help of a financial professional, and the use of tools such as the Special Needs Trust, insurance analysis, and a detailed life time plan of assets vs. expenses, but the important thing is to start looking for savings now! Examine your spending habits, identify where you can cut expenses, and start stashing some funds away in a savings account. And, be sure to book that appointment with a special needs financial planning expert – it will be worth it in the long run.
Mistake #2: Designing a Special Needs Trust Incorrectly
At M&L Special Needs Planning, the Special Needs Trust (SNT) is a commonly discussed topic among our clients, friends and family. As we have written and stated many, many, times, the SNT is an essential part of any special needs financial plan. The SNT is established by placing funds and other assets under the control of a trustee – it is a legal document which is designed solely for the financial protection of an individual with a disability. It is the only legal way for a beneficiary (the individual with a disability) to receive the benefit of unlimited extra income without sacrificing valuable state and federal benefits.
It is absolutely essential that the SNT be written correctly – the second most common mistake that individuals make when creating financial plans for their loved ones with special needs is to establish the SNT without the help of a legal professional who has experience with working with families with special needs. It is important to know that a trust which does not contain the correct language, or is designed incorrectly (without regard for eligibility laws) may disqualify a person with disabilities from government benefits, specifically from Supplemental Security Income (SSI) and Medicaid.
M&L has published a number of blog topics on the SNT – to learn more, please click here to read our archived blogs. And, to avoid making the mistake of incorrectly designing a SNT, please contact an attorney who has experience with this type of legal document, and working with families with special needs. If you can’t find one, please contact us! We would be happy to refer you.
Mistake #3: Putting Resources/Assets in Name of individual With Special Need
The third most common mistake that people make when financially planning for individuals with special needs is done – like most mistakes – with the absolute best of intentions. Often a close relative or family friend will either “gift” or place an asset in the name of the individual with a disability – this may be done on a special occasion, such as a birthday, or with the intention of providing the individual with a source of income or a tool (i.e. rental property, large cash gift, etc.) that will be useful in the long term. This gesture, while on the surface seems helpful, can actually do great harm to the individual receiving the gift. This is because federal and state benefits are “needs based”, meaning that an individual’s assets and resources are considered when judging eligibility for these benefits. In fact, in order to maintain eligibility for SSI, an individual has to have less than $2000 total in assets and/or resources.
So, how do you avoid making this mistake? If you are the person considering giving the gift, discuss it with the parent of the individual first to see how they would prefer you to proceed. If you are the parent of the individual who may receive gifts, ensure that all friends and family know how to “gift” properly. And, above all, talk to a professional about establishing a Special Needs Trust so that you can store assets for your loved one while protecting his or her eligibility for benefits.
Mistake #4: Applying For Government Benefits without Proper Preparation/Info
At M&L Special Needs Planning, LLC we know that an extremely common mistake that many people make when applying for the government benefits SSI and SSDI is not having the proper information or documents on hand at the time of application. We also know that most applications are denied due to lack of documentation. Based on our experience with applying for government benefits – we have personally completed applications for our own family members, and it is one of our most popular services at M&L – we know that YOU DO NOT WANT TO BE DENIED DUE TO LACK OF DOCUMENTATION. This can be an extremely complicated process, and it can often take years to fix an application that has initially been denied.
At M&L Special Needs Planning, we are considered experts in the area of government benefit counseling. We help with understanding what the government benefits are and how they relate to a specific individual with disabilities. We work with families in the application process for Supplemental Security Income (SSI) and/or Social Security Disability Income (SSDI). In fact, in 2013, we have a 100% success rate of helping families secure these valuable benefits for their children with special needs.
So, how do you avoid being denied for these benefits? Contact us, and we can walk you through the process. You can also check out our workshop, titled Understanding SSI/Medicaid and SSDI/Medicare. The “Understanding SSI/Medicaid & SSDI/Medicare” workshop is designed to help families reach a greater understanding of the types of government benefits programs available; these benefits are explained in clear, concise language – we spend time discussing what exactly the government benefits and programs are, their importance, when to apply, how to apply, how to qualify, and how much money the individual with special needs may possibly receive. We will discuss the process of transitioning between SSDI (Social Security Disability Insurance) and SSI (Supplemental Security Income), and how to keep Medicaid and/or Medicare without the government benefits of SSI or SSDI. We also briefly touch on work incentives, and how they assist beneficiaries with their employment efforts.
For more information on these government benefits, you can visit our blog archive to read any of the blog posts we have published on the topic.
Mistake #5: Not Having Enough Insurance
Purchasing life insurance isn’t an easy task. Not only is it hard to estimate how much a loved one will need to continue his or her quality of life long term, it can be difficult to contemplate a time after you have passed. It can also be difficult to contemplate how your loved one will fare after you are gone. Having adequate insurance, however, is incredibly important – and the fifth most common mistake people make when financially planning is (in our opinion) underestimating how much money it will take to secure the future of their loved ones with special needs. So, how can you fix and/or avoid making this mistake in the future?
Our solution to this mistake is to suggest that families complete an “Insurance Needs Analysis”. The main goal of this type of analysis is to make sure there is enough money to support the family in case of death, disability or illness. In addition, assets or insurance is purchased to fund the special needs trust for the individual with special needs. A critical discussion in this analysis is answering the question of who will take care of the caretaker in case of disability or old age. While completing this process, we look at questions such as “how much insurance is needed to supplement the income lost due to death of a spouse or caregiver?”, and “is there long term care in place, if so what are the trend of costs in this area?”
To learn more about the Insurance Needs Analysis, please visit our informational webpage on the topic. If you have further questions, or would like M&L to complete this process with you, please contact us!
We hope that this article has helped you avoid many of the mistakes the people make when planning for the financial future of their families with special needs; we also hope that if you haven’t begun your financial plan it inspires you to start right now! M&L staff, who are experts in financial and life planning, can help you with every step of your special needs journey. We can provide financial advice, counselling services, referrals to other professionals in the special needs industry, and much, much more. We can even handle your financial planning from beginning to end with our Comprehensive Special Needs Financial Life Plan.
So, if you have questions about any of the above mistakes, or would like to know how to properly plan for the financial future of your child with special needs, please contact us! We are happy to provide you with the advice you need. As well, please browse our Services and Workshops webpages to see the specific services that we offer.
Thanks again for dropping by – please join us next week for an update on our Independent Living Program and Housing Project database.
Leave a Comment