Niece diagnosed w degenerative disease, how to plan for an uncertain future?

[ddscook]

My 4 year old niece was recently diagnosed with a degenerative neuromusclar disease, specifically a mutation of a collagen gene. As these diseases go, we don't fully know what degree of disability to expect in her future. We're hoping for the best but preparing for the worst.

The first thought my brother had after the initial depression and denial phase was - "what kind of financial situation do I need to prepare for to give my daughter the best life with a disability?" And I wanted to pose that question to you all, hoping for some guidance to pass onto my brother as to how to be best prepared financially for this uncertain future for his daughter. I realize there is a lot more than just finances we need to be worried about, but the best way to cope for him right now is to plan and prepare.

A little about my brothers finances: He's a 36 y/o 1099 consultant making around 250k, his wife is an employee consultant making around 120K - health insurance is from her employer. They live in a HCOL area - they're financially conservative and living within their means (not below). They have 2 girls, a 2.5 y/o and a 4 y/o. They already have term life, short and long term disability, 529 funds, several retirement accounts, a healthy emergency fund.

His biggest concern is cost of healthcare in the future. I was thinking he should probably try to get an HSA (not sure if their current health insurance plan has a high deductible option)...what others ways could they start preparing for this financially?

 

[jfoxcpacfp]

Devastating diagnosis and my heart goes out to all of you. I just can't imagine the grief they are experiencing. Miracles happen and I pray that for your brother's family but best to be prepared.

A quality health insurance plan is foremost, of course. They should also look into a special needs trust (SNT) through their Last Wills and Testaments for her. If the parent(s) were to pass away, a SNT would allow her guardian to apply for government benefits on her behalf without having to deplete assets left to her beforehand. Of course, they also need to look at guardians and caretakers in the context of the LWT. They could DIY, but I strongly suggest speaking to an E&T attorney who specializes in this area.

[ddscook]

jfoxcpacfp wrote:

Devastating diagnosis and my heart goes out to all of you. I just can’t imagine the grief they are experiencing. Miracles happen and I pray that for your brother’s family but best to be prepared.

A quality health insurance plan is foremost, of course. They should also look into a special needs trust (SNT) through their Last Wills and Testaments for her. If the parent(s) were to pass away, a SNT would allow her guardian to apply for government benefits on her behalf without having to deplete assets left to her beforehand. Of course, they also need to look at guardians and caretakers in the context of the LWT. They could DIY, but I strongly suggest speaking to an E&T attorney who specializes in this area.

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Thank you, Johanna.

I've never heard of a special needs trust, I will start looking into that right away!

[jfoxcpacfp]

ddscook wrote:

I’ve never heard of a special needs trust, I will start looking into that right away!

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I forgot the link and just edited to add it but you'll find lots of information on the internet.

[Dr. Mom]

My heart goes out to your brother and his family.  Great that they have your support.  My thoughts...

Non-financial- Be sure you voice to him that it is okay for the feelings of depression and denial he is experiencing.  His wife likely is going through the same.  Stress that they need to take time to take care of themselves individually and as a couple.  The best thing they can offer their children is a loving stable home. Men often need to hear that asking for help is a sign of strength.  If counseling is needed, suggest it and be supportive.  For the child, start researching best PT and OT options available in their area.  Their pediatrician should be able to guide them.

Financial-For now I would advise that beyond maxing retirement funding annually, they build up as big a cash cushion as possible.  Help him set realistic monthly goals that are easily achievable to help them feel some control and a give a sense of accomplishment financially.  They can redeploy funds in the future when it is clearer what her prognosis is and needs are.  The peace a large cash umbrella offers at difficult times like this should not be underestimated by those who have not been there.  For healthcare, they need to run the numbers of having a high deductible plan with an HSA if they know they will be using up the HSA funds every year.  Often those plans work best when the family is healthy.  In our situation, we have found that paying for the Gold Plan option saves us money over the HDHP with HSA.  My husband owns his practice so we can choose what plan we offer ourselves and our employees.  If they have other options, they should be considered when future needs are clearer.

You and your family are in our thoughts and prayers.

[MPMD]

My wife and I talk about how we would handle something like this. I think for us the key points would be moving to a LCOLA (currently in city of Chicago) and cutting way back on lifestyle to just create as much wealth as humanly possible.

Obviously this would be a drastic life change but at that point I think it becomes all about securing the future for the child.

This might not be an option for consultants, I know they generally don't have the inverse relationship between cool area/salary like docs do. So many of my non medical friends are surprised when I tell them I could make tons more money if I moved to a small city in the SE.

[Hank]

Special needs trust and / or a 529 ABLE account.  Your brother and sister-in-law should work with a trust and estate attorney who has extensive experience with planning for care of special needs dependents.

Agree with finding the best PT and OT you can.  Get with the school district to see what kind of support they can offer.  Here is California there are preschool programs through the school district for special needs children.  Also look to see if there is a non-profit that helps to coordinate care and services in their area.  Some things are means tested, others are not.

[Dr. Mom]

Rex wrote:

I’m not sure it’s wise to advise the large cash cushion

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I'm sure.  But, I am not advocating it forever, just for now.  Their future has changed dramatically.  They will come to a new normal in time and with education.  Cash buys them time and flexibility.  Their "healthy" emergency fund number will likely change, as may many of their priorities.   Medicaid planning would be much farther down my list at this point, except to see if she qualifies for any early intervention services now.

[ddscook]

Thank you for all the replies, this is great information and helps greatly with knowing where to begin. I've got my list ready to start researching all these things! Greatly appreciate all your support and responses!

[MPMD]

Rex wrote:

I’m not sure it’s wise to advise the large cash cushion

You need to really look at the numbers and what Medicaid will offer.

For some of these situations the costs are so high that you deplete your reserves no matter how much you save and then you still hit Medicaid. Definitely still max out retirement accounts but after that it requires sitting down and running numbers.

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Medicaid is under direct assault right now and that shows no signs of abating. The mood in the country is the cut this benefit rather than expand it. ************************, even the fairly uncontroversial CHIP program has been defunded.

Not saying you need to expect doom and gloom, but in the current climate it would be quite irrational to expect Medicaid to care for this child.

[StarTrekDoc]

As others pointed out two important factors:

1.  Health insurance -- one of the two should consider long term employment with a stable employer with known health plan with extends the adult child benefit beyond 26yo and plan for retirement with health benefits that will extend to the daughter well into her own adulthood -- unless you want to be at the mercy of medicaid.

2.  Special Needs Trust -- definitely if any substantial assets are to be designated for her.  Keep NO money in her name for medicaid reasons  no UTMA.   Make all family members aware of this to direct anything to the SNT.    the new ABLE accounts are viable but too new IMHO to know what's going on with them -- we've stayed clear of it to date.

3.  SS -  with two employed spouses, you'll want to look at this for long term -- right now since she's 4yo, the horizon on this is very far off, but like #1, career planning on this is game changer well beyond simple employment/benefits.   Hours and flexibility and support are just as important from both spouses to make this work long term.

[Dr. Mom]

Just to clarify my comment on early intervention-Because your niece is 4, the appropriate place to access the services will be through her local school system as Hank mentioned.  The school often has a waiting list.  It could take several months before her turn arises, so advise your brother to start this process sooner than later.  Again, her regular pediatrician can be invaluable in helping navigate resources.

[Dr. Mom]

I was not familiar with 529 ABLE accounts.  Here is a good article from Michael Kitces on them versus special needs trusts.  I would definitely discuss which to use with a knowledgable attorney in your brother's state prior to setting anything up.  It does not appear that a current 529 plan for the child is allowed to be rolled into a 529 ABLE account for the child.  But one child's 529 could be rolled into the siblings without penalty.  Then the 529 ABLE or SNT set up instead.  The 529 ABLE is just a few years old so rules could change, but I wouldn't let that deter them from using it.

https://www.kitces.com/blog/will-section-529a-able-accounts-replace-the-need-for-disabled-beneficiary-special-needs-trusts/

[StarTrekDoc]

ABLE is nice, but the limits are too small for Long Term planning for this family income of 350k+.

Get a Special Needs Lawyer to navigate the initial needs from the School District and whatever state/county services are controlled (in Cali, we call the Regional Centers).  Lawyer will know the state laws and health insurance requirements --- like PT/OT/ST coverages where health insurance vs school district responsibilities lie .

[Slav4ikMD]

Just to add my two cents as a child psychiatrist who works with a lot of kids with developmental disabilities:  although some of the laws may be state dependent, in all likelihood this kid may meet criteria for OPWDD and may be eligible for Medicaid, regardless of family's current financial status.  I think it is critical to assess not only her current medical condition, but see where she is at developmentally and cognitively, make sure they request an urgent CSE through the district, get her an IEP, get her educational testing and all the necessary accommodations through the district (even if she is not yet in school).  If a child has OPWDD eligibility, in many (all?) states they would also be eligible for free home maker services to help care for the child.  All in all, I think the most high yield next steps would be to meet with a good attorney who works with special needs kids, to establish care with an excellent developmental pediatrician (and of course whoever is caring for her specific condition) and look into services through the district and OPWDD.  Hope this helps and all the best to the family!