Special Needs Kids Need Special Financial Planning

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Cute little boy with multiple disabilities interacting with his teacher during a lesson at his school.
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Isaac Cutler-Kreutz, like most kids in high school, is looking forward to graduation two years from now. But unlike his classmates, Isaac's future is not wide open. The 19-year-old doesn't have dreams of college, a job or an independent life.

Before his third birthday, Cutler-Kreutz developed brain cancer, which led to a severe stroke, both of which have limited his mental and physical abilities.

"We recently had to go before a judge and argue that he should be declared incompetent and stripped of all of his rights so we can become his legal guardians. How sad is that?" said his mother, Liz Cutler, a teacher at a private school in Princeton, New Jersey. "Isaac is essentially penniless, and he has to be kept penniless or he won't be eligible for government aid when he graduates high school."

Life Planning for a Expensive Future

The financial rules are different for the 20 million U.S. families with special-needs children. While most parents hope to leave something to their offspring, parents of special-needs kids who want to do that can't simply name them in their wills.

"Medicaid is the golden ticket the child needs to get into the programs they require," said Mary Anne Ehlert, president of ProtectedTomorrows.com, which helps people navigate the process of planning life processes for people with developmental, physical and mental disabilities. Assets of more than $2,000 in the child's name could disqualify the child.

However, Medicaid, Medicare, Supplemental Security Income and other government programs cover only a fraction of the $2 million to $4 million it will take to provide a lifetime of care. So experts suggest that parents in their wills set up a special needs trust, which can hold an unlimited amount of assets for a disabled individual.

Ehlert emphasized that families need to consult a specialized attorney who can proactively correct the common slip-ups that can undo such a plan. For example, families need to check beneficiaries on pension plans and employer-provided life insurance policies. "You may have checked the box years ago [naming the child as beneficiary], but that's what we're trying to avoid," she said. She notes that many people fund these trusts with life insurance policies, but she advises against using term policies.

"There are lots of hoops to jump through in order not to jeopardize his future," says Albert Freedman, father of 19-year-old Jack, who has lived his entire life in a bed or a wheelchair. Jack has spinal muscular atrophy, a genetic disease that severely limits his ability the move or talk but does not impair his ability to think or learn. He goes to a mainstream school -- Unionville High School in Pennsylvania -- and is set to earn a graduate certificate next year but will stay at the school until age 21. He communicates by typing on an iPad that has a camera calibrated to his eye. "Basically, his left eye is the computer mouse," Albert said.

Adulthood Raises Another Issue

One key issue for parents of children with special needs is to decide on how and where these children will live as adults. The options are limited, expensive and often difficult to find. Choices include residential programs in large group homes, smaller group homes, or remaining with their parents.

Both Cutler and Freedman have decided to keep their children at home. "I don't think Isaac has the capacity to live without us," said Cutler. "For one thing, he would be incredibly sad."

"Isaac has so many needs. I would have to hire a really great mom to be with him. I'm already a great mom for him, so why would I do that?" says Cutler. "I'm almost 60, and I'm going to be a caretaker until I'm elderly, but I would be torn apart if he lived somewhere else."

Retirement Issues, Too

Dave Sosson and Laurie Frankel Sosson are in different position. Their 7-year-old son Kyle has autism and attends a specialized school. "Kyle is making progress, especially with the life skills he needs," according to Sosson. "We hope he'll go to a regular school soon, but we have to be realistic, so we need a plan to guide Kyle's life, to make sure he gets the services that he needs." They have also set up a special needs trust. "I have had to coach my parents that we have a trust and anything they want to give to Kyle has to be directed to that," said Sosson. "That took a lot of teaching," as well as direct contact with his parents' attorney in Florida.

Ehlert noted that that many parents of special-needs young adults may be nearing retirement age. "Remember, you're retiring for three people, not one or two. You'll be subsidizing him for the rest of your life."

Drew Trachtenberg has personal relationships with several people in this article: Albert Freedman recently married a relative; Liz Cutler is a long-time friend; and Laurie Frankel Sosson is a former colleague.
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