A Publication of WTVP

One of the most challenging issues facing parents of children with special needs is preparing for their child’s future without them. Preparing the finances for a child with special needs deserves special attention from the child’s parents, grandparents and other relatives. With ever-changing laws and legal procedures, it’s important for families to regularly revisit their financial plans to ensure their child with disabilities is well-prepared for the future.

According to the U.S. Department of Health and Human Services, 12.8 percent of American children ages 5 through 17 have or have an increased risk for a chronic physical, developmental, behavioral or emotional condition. Twenty percent of American households have a child or children with such special needs.

The right to an appropriate education is guaranteed to all children with disabilities, regardless of family income. However, careful preparation is necessary to preserve eligibility for most other publicly funded disability related programs, especially as the child reaches the age of majority (usually 18 yrs of age). Maintaining eligibility for basic government programs is important, but should be done with the understanding these services are not going to be adequate to meet all the child’s needs.

Special Needs Trusts

It is important to know that an inheritance may cause many problems for the child. An inheritance worth as little as a few thousand dollars could disqualify an individual with disabilities from most federal benefits, such as supplemental security income (SSI)and Medicaid, as well as some state programs. This is an enormous loss for many, since critical services such as supported employment and vocational rehabilitation services, group housing, transportation assistance and personal attendant care could be jeopardized.

An effective estate plan would include a special needs trust—a legal document—in which the family leaves chosen resources, such as money or property, to the trust. It is managed by a trustee on behalf of the person with the disability, and is given absolute discretion to determine when and how much the person should receive.

There are many types of special needs trusts which serve different purposes and laws affecting trusts vary state to state. It is imperative that the family work with a knowledgeable attorney and a financial professional.

Funding the trust

For some families, funding a trust may require a reallocation of the assets they already have, while others may seek more assets to allocate. In this case, permanent life insurance may be a solution. A permanent second-to-die life policy often makes the most sense since the death benefit becomes payable only when the surviving parent dies—the time when the funds will be needed. This money can then be “housed” inside a special needs trust and be used for supplemental long-term quality of care needs.

Grandparents may consider life insurance as an effective way to allocate assets to their grandchild. Instead of designating their grandchild as a direct beneficiary, proceeds should be left to the special needs trust.

Preparing for the future

There are important considerations parents should make when preparing the financial future of special needs children. Here are a few suggestions:

Resources for parents

There are many national and regional organizations to contact for more information on preparing for the financial future for children with special needs and related issues. Some national organizations include: National Council on Disability,; National Information Center for Children & Youth with Disabilities,; Our-Kids (for families of children and adults with disabilities),; and S.N.A.P. (Special Needs Advocate for Parents),

Whether a family has substantial means or few assets, a young child or adult child with disabilities, preparing for the financial future of a loved one is critically important. How parents and the child’s family leave their assets after death may greatly affect the quality of life for their family member with special needs. TPW