Saving for special needs

[31415]

43yo doc with working spouse, with a typically developing 8 yo and a 5 yo with mild/?moderate autism and neurofibromatosis type 1, no current issues with NF.   Total household income ~650k, maxing out retirement accounts, roths, + 50k cash balance yearly in a mix of total market index funds, with a bit going into taxable every year. No debt except small mortgage.  2.2 million saved, half in taxable, $180k in 529 plan, just started utma's for each kid 10k each. 3.4 mill net worth.

Wondering what savings strategies or targets others use in this situation for children where it's not clear how much support they will need as adults.  With autism and NF especially you really have no idea what the future holds- I'd planned to retire by the time I'm 60, but now I feel like no savings number is big enough.

I don't think our son qualifies for the 529 ABLE, but I'd also be interested in hearing from anyone who has set one up or a special needs trust etc, and any medical insurance moves you've made for after they age out of parent's insurance.

Thanks!

 

[wa2106]

You may try listening to this podcast if you haven't already - I don't have any special needs children but found it educational.

https://www.choosefi.com/108-setting-up-a-special-needs-trust/

[SLC OB]

wa2106 wrote:

You may try listening to this podcast if you haven’t already – I don’t have any special needs children but found it educational.

108 | Setting up a Special Needs Trust

Click to expand...

You beat me to it! Great Podcast.

I think to qualify for the 529 ABLE plan you must qualify for SSI.

I found this but not sure if it applies to your kid:

https://www.disability-benefits-help.org/disabling-conditions/autism-and-social-security-disability

I have heard (but don't totally understand why) that sometimes in this situation that Whole Life Insurance could be of benefit (one of the only times).

[CrockettsRiver]

Does he not qualify for an ABLE account because of his level of disability?  He can have a special needs trust (and you can still add an ABLE later if he becomes eligible)

You can start with The Special Needs Planning Guide by Haddad and Nadworny.  This is the website of the authors:  https://specialneedsplanning.com

There are CFPs who specialize in special needs planning.  This website lists them by state (I haven't used this website so can't personally vouch for it):  https://specialneedsanswers.com/USA-special-needs-planners.  all the usual caveats about hiring a financial planner apply: ask about fiduciary duty, how they are paid etc.

The NF foundation may have some resources, although I understand that it's hard to say at this point how much his NF may affect him or what the outlook is.

Tread carefully before investing in whole life.  Whole life insurance has been marketed heavily to people with special needs kids, because of the ability to pass on benefits tax-free.  With the current estate tax you probably won't have to worry about estate taxes anyway, and might be better off with a special needs trust as part of your estate.

You may, however, want to consider additional term life insurance.  Is your spouse a full-time caretaker?  Most people don't get term life on a non-income-earning spouse, but if that person is doing the heavy lifting (doctors appointments, therapies etc) then their early passing would be a huge blow to the family - imagine hiring someone to do all the functions that caretaking spouse currently does.

You sound well positioned to take care of your kiddo.  Best of luck, happy to try to answer more questions.

 

 

[31415]

Thanks for the feedback, I'll check into those references!

[dreammd]

Thanks for starting this thread. This topic is a consideration for myself as well as a physician and parent of a special needs child.

I thought the podcast you cited was informative.

I also found the suggested book, The Special Needs Planning Guide by Haddad and Nadworny, informative.

WCI- I think this topic would be great for a dedicated blog post or podcast by you for more in depth discussion of considerations for financial planning for special needs children. For example, how would you adapt your 12-step bootcamp suggestions for those in this situation, if at all? Very little on this topic when I search the WCI forum. Any more information would be appreciated!

Be well.

[Slav4ikMD]

I rules may vary slightly by state but I am pretty sure that in all states someone like your child would quality.  ABLE accounts generally have fairly small limits though and I think typically there is a 100k limit, beyond which the amount may impact eligibility for other benefits, so you have to be careful about keeping a "low" balance.  Just take a look at your state specific website for ABLE.  Agree re setting up a supplemental needs trust.  Also consider applying for OPWDD benefits early and look into something called "self direction" if available where you are, which gives you a lot of flexibility as to how to use the budget that may be allocated to you.

[Slav4ikMD]

https://www.whitecoatinvestor.com/able-a-tax-protected-investing-account-for-your-special-child/

[BurnedoutDoc]

Autism is absolutely a diagnosis that qualifies for an ABLE.  Another great podcast recommendation is The Money Guy Show.  He did an episode July 2016 about ABLE accounts and actually has a daughter with autism.  Many states will now also let you role a 529 into an ABLE, check your state rules.   The account limits only apply to getting things like medicaid/other supports after age of adult.  If your child will be on your insurance until age of 26 you have a fair amount of time to "spend" some money.  The rules on ABLEs are much less restrictive than a 529: healthcare, education, housing, etc.  The actual amount limits are sorta like 529's, you could open in multiple states, there really is no limit.  Only limit might be your gifting amount each year.  If ACA still exists, and your child does not have a high income, after age 26 you should be able to get a cheap policy.

[kyphoscoliosis]

Hey same here, 40yo physician, stay at home spouse, with a 5yo with NF1 (primarily ADHD symptoms, no tumors yet) and typically developing 3 and 1 year olds

Once you are past the "WTF" moment with NF1 diagnosis (I am actually a neurosurgeon, so you can imagine), comes the obvious concern with planning for the future. NF1 is particularly tricky because it may range from fully-functioning adult with mild adaptations to completely disabled, and you have no idea what it is going to turn out.

firstly, WCI has been fantastic to help me set up the basics. I owe a lot to Jim Dahle and the forum participants. Maxing out a 403b, doing backdoor Roths for both parents, 529s for all kids, now working on setting up solo 401k from a side gig. Rest goes into taxable (all index) and paying mortgage, which is only debt - now standing at 1.1x yearly income.

The question that always comes up with special needs is whole life insurance. Even more marketed for people like us and it actually just begins to make sense. I stuck to my principles and opted for good LTD insurance (employer's - which is useless unless completely disabled - and an own-occupation policy) and staggered term insurances ($2m through employer, $2M 20yr and setting up $2M 30yr) because I am confident in the ability to accumulate resources. Can always walk away from the 30yr if necessary.

Anyone dare make a point for whole life?

[djohnflatfeecfp]

kyphoscoliosis wrote:

Hey same here, 40yo physician, stay at home spouse, with a 5yo with NF1 (primarily ADHD symptoms, no tumors yet) and typically developing 3 and 1 year olds

Once you are past the “WTF” moment with NF1 diagnosis (I am actually a neurosurgeon, so you can imagine), comes the obvious concern with planning for the future. NF1 is particularly tricky because it may range from fully-functioning adult with mild adaptations to completely disabled, and you have no idea what it is going to turn out.

firstly, WCI has been fantastic to help me set up the basics. I owe a lot to Jim Dahle and the forum participants. Maxing out a 403b, doing backdoor Roths for both parents, 529s for all kids, now working on setting up solo 401k from a side gig. Rest goes into taxable (all index) and paying mortgage, which is only debt – now standing at 1.1x yearly income.

The question that always comes up with special needs is whole life insurance. Even more marketed for people like us and it actually just begins to make sense. I stuck to my principles and opted for good LTD insurance (employer’s – which is useless unless completely disabled – and an own-occupation policy) and staggered term insurances ($2m through employer, $2M 20yr and setting up $2M 30yr) because I am confident in the ability to accumulate resources. Can always walk away from the 30yr if necessary.

Anyone dare make a point for whole life?

Click to expand...

Not making a point to justify, just wanted to share what a technique one advisor I know who specializes in families with loved ones with special needs uses when it comes to funding their kid's future.  The short version is the child qualifies for SSI and still lives at home.  The parents charge the child a "reasonable" rate for room and board.  Not the entire SSI benefit, but maybe 1/3. The parents then use the equivalent dollars to fund a 2nd-to-die whole policy. I never dove into the specifics with her, but I get the concept.

 

Certainly doesn't apply in those cases where parents have accumulated sufficient assets, but a good way to utilize the leverage of an insurance policy to help fill in a gap if a family hasn't been able to save enough for two generations.

 

There is a big "special needs" planning group near me.  I've come across a few of their clients and the "investments" are dominated by whole life policies. If I weren't so jaded, I would swear they teach their salespeople that every special needs family has to have whole life regardless of need.