Financial Considerations for Parents: Disabled Kids Need Lasting Support
By Susan Doktor
Wherever they go—from the classroom to the playground to the physical therapist’s office—disabled kids need strong advocates by their side. You’ve stepped up to the plate in countless ways over the years, seeking out resources like this blog to build your child’s confidence, provide life-enriching activities, and protect him or her from discrimination. And that’s in addition to what even parents of non-disabled kids have to do. You go to work, you put food on the table, you keep a safe, clean home, and more. Your child is lucky to have you.
But you also take on other serious responsibilities—and it’s probably a considerable emotional burden. You worry about the future. What would happen to your children if you weren’t around to look after them? Caring for kids takes time, energy, and, of course, money. Would someone else have the dedication and resources to continue to support your child the way you’ve done for years? You’re not alone if that question keeps you up at night, I can assure you.
No one relishes thinking about their own death and, least of all, parents of dependent children. But parents owe a duty of care to their kids to think about the unthinkable—and plan for it. That’s where estate planning—and life insurance, in particular—come in. Have you taken the necessary steps to secure your kids’ future? Here are a few every parent who wants to provide for their children when they’re gone should seriously consider. And if the task seems overwhelming, know that there are professionals who can support you as you take on the task of being ready for anything.
Step One: Imagine Your Child’s Life Without You
The very idea is sad and disturbing at best—and, at worst, terrifying. Picturing our children absent our love and care is one of the toughest obstacles parents face when planning for the future. Push past the fear and imagine the best-case scenario for your kids. Then take the necessary actions that will make your vision a reality when you pass away.
Step Two: Write a Will
You know that you want your kids to be happy, healthy, and safe. But perhaps you haven’t given much thought to what that will take to keep them that way. When you write a will, that’s precisely what you’ll consider. No one knows better than you (or perhaps your children’s other parent) how your children should be cared for. That’s why you shouldn’t leave it up to anyone else, especially the courts. Writing a will is how you ensure that your wishes for your child—whether that includes a college education, music lessons, or ongoing health services—are followed.
Writing a will takes a lot of time and thought. Don’t rush through the process. You may want to have conversations with several members of your support team, especially if you are naming a permanent guardian in your will. You’ll also want to name an executor of your will: the person who oversees the process of filing a mountain of paperwork, paying your debts and distributing your estate. An executor makes sure the terms you lay out in your will are “executed” properly.
As you write your will, take notes or put together an outline, write a draft, and revise it so that your will’s meaning is perfectly clear. Consulting an attorney during this process is the best way to ensure your will is legally airtight. It’s generally not a tremendous expense and an attorney may be able to advise on certain tax-saving steps you can while you’re living. Hiring an attorney can pay for itself, especially when you consider the legal costs your loved ones may incur if your will isn’t properly written.
Step Three: Thorough Financial Planning
We don’t have to tell you that raising kids is expensive. The federal government periodically estimates the cost of raising a child to the age of 18 and, accounting for inflation since its last estimate, the price tag on parenthood is over $260,000. That total can skyrocket if you want to provide for a child’s college education. And the figure doesn’t include the special care that disabled kids often require.
Ideally, you started saving for your child’s future before he or she was even born. But ideal situations are hardly the norm. If you haven’t been quite so future-focused, today is the day to change your perspective and start setting aside cash in a savings account or consider another conservative investment strategy.
If you envision your child attending college, you may want to look into a 529 savings plan. In many states, you can take a tax deduction for your 529 deposits. And the money you earn on your savings won’t be subject to federal income tax when it’s withdrawn to pay for college.
The money you place in an individual retirement account (IRA) may qualify as a tax deduction, too. If your employer offers a 401K plan with matching contributions, take advantage of it. That’s money you’re leaving on the table if you don’t participate. Name your children as the beneficiaries of your retirement account in your will. Should you pass away before you retire, your children will benefit from your diligence.
These are just a few suggestions and one strategy doesn’t fit all families. Your best bet is to consult with a certified financial planner to develop a plan that will benefit your children the most.
Step Four: Invest in Life Insurance
Not everyone earns enough money to leave hundreds of thousands of dollars from their own savings to their kids. And even for those who do, life insurance is almost invariably recommended by financial advisors for anyone raising children.
There are two general categories of life insurance: term life and whole life. Term life insurance is less expensive than whole life, especially when you are young and healthy. You purchase it for a specific length of time—its term—and should you die during the term, the policy pays a death benefit. Otherwise, the only benefit it pays is peace of mind, which is valuable in its own right. Whole life insurance incorporates an investment element. It, too, pays a death benefit, but as you pay your premiums, the policy gains separate value, which you can access while you are living. Which type of policy is right for you? That decision is best made in concert with a financial advisor who can analyze your needs and your budget.
As the parent of a disabled child, it’s important to consult an attorney when you purchase life insurance. Disabled children are entitled to government benefits so long as they have no significant assets. However, they’re at risk of losing those benefits when they suddenly come into a large sum of money. That’s why parents of disabled kids are often advised to set up something called a supplemental needs trust (also known as a special needs trust) when purchasing life insurance. In the event of a parent’s death, the policy proceeds flow into the trust and, technically, the child who benefits from the trust doesn’t actually own the money. A trustee is assigned to distribute the funds from the trust to pay expenses that government benefits do not. If you want your child to have the most financial support possible, setting up a trust is the way to do that.
Step Five: Seek Support
Your job, as the parent of a disabled child, is taxing. Every day brings new challenges as you seek, not only to meet your child’s basic needs, but also to help him or her learn, grow, and achieve greater independence. Where will you find the time and energy to take on the additional task of securing your child’s financial future? You’ll find it by taking advantage of the wide range of resources available to parents of special needs kids. Your child is unique, of course, but your experience as a parent is shared by many. There are countless organizations that serve parents like you, who are trying to do your best under difficult circumstances. Realabilities is one of them and we can point you in the direction of many more. Check our site frequently for the support and news you can use to help you meet your goal of providing the greatest opportunity for your disabled child to thrive.
Author Bio:
Susan Doktor is a journalist, business strategist, and principal at Branddoktor. She writes on a wide variety of subjects, including finance, education, family matters, and government affairs. Follow her on Twitter @branddoktor.