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Financial Planning for Families with a Disabled Child

Michael Becker
The United States Department of Agriculture (USDA) estimates that it costs the average middle-class family over $222,000 to raise a child today-a 22 percent increase from 1960. Depending on the level of need, this number increases exponentially for parents raising a child with special needs. In 2008, Ohio parents with a special needs child, for example, paid over $756 per year in extra out-of-pocket expenses. Parents who prepare and plan ahead of time for the costs associated with raising a child with special needs can alleviate pressures experienced when there is a new addition to the family.

Create a Budget for Monthly Expenses

Along with the normal monthly bills, a special needs child will most likely need additional resources. Noting the costs of medication, therapy, special medical care and equipment, nannies and special food, and allocating these costs into the monthly budget will help parents get an idea of what expenses are to come.

Verifying Health Insurance Coverage

Health insurance can be a lifesaver to parents caring for a special needs child. Knowing what procedures or medications are covered or not covered under a particular health care plan will allow parents to determine out-of-pocket expenses. Deductibles and the cost of emergency rooms visits are sometimes overlooked as part of these monthly medical costs. Some employers also provide Health Spending Accounts that allow you to make tax-free contributions that can be used to offset out-of-pocket medical expenses.

Retirement Funds

Setting aside money in more than one retirement account can help prepare parents for life with a dependent. Along with a 401k, IRA’s and managed stock funds are also good investments for parents to look into.

Planning for the Future

Unfortunately, many special needs children will need continued assistance with their daily needs for their entire life. Parents do not want to think about how their child will be cared for when they die, but thinking about the following options and putting into place the ones that best meet a family’s needs can offer piece of mind and reassurance:

  • A will: A will is a legal document that includes a person’s exact instructions and wishes as to how he or she would like his or her property and assets distributed after they die. Via a will, parents can assign everything they own such as their home, land, bank accounts, investments and stocks, jewelry, and life insurance benefits. This legal document is helpful because it provides parents reassurance that their wishes will be carried out exactly as they intend.
  • Special needs trustA special needs trust (also called a supplemental trust) is a legal document intended for the use and benefit of individuals with physical or mental disabilities. This type of specialized trust allows parents to put aside an unlimited amount of assets for their special needs child. This document is helpful because any assets put into a special needs trust will not be counted for purposes of determining whether a special needs child will qualify for certain government benefits such as Supplemental Security Income (SSI) or Medicaid.
  • Life insurance: A life insurance policy is an insurance policy that provides certain monetary support for the policy’s beneficiaries. Parents who take out a life insurance policy for the benefit of their special needs child is another way parents can be reassured their child will be financially secure in the event of their death.

The addition of a child no doubt is a life changing event for any family. Taking note of these important factors ahead of time can help families adjust.

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