Financial plans for special-needs children

Special-needs trusts

One way families can plan to pay for caregiving -- even if their children are receiving benefits such as Medicaid and Social Security -- is to create a special-needs trust.

"With the special-needs trust, the money that goes in is for the benefit of the person, but it's not owned by the person. It's not their money. The money is controlled by a trustee," Nurse says.

Not all adult children with disabilities will need a special-needs trust. But for those who do, the fund will have to hold millions of dollars to provide for an adult child with major needs, he says.

"When you're talking about $30,000 to $70,000 per year, with medical inflation and extended life expectancy ... it takes a lot of money," Nurse says. "The vast, vast majority of special-needs trusts are empty. They're receptacles, waiting for the future. The money comes from life insurance."

Considering quality of life

That's the case for his family, Nurse says. It's how he and his wife plan to provide for their daughter Shelby, who has cerebral palsy.

While Social Security and Medicaid may pay for basic needs, "There are no public funds for quality of life," he says. "That's one of the goals for families -- that their child can actually go out to dinner, get their hair cut, have a cellphone."

But those expectations can be expensive. By thinking about Shelby's future needs now, Nurse and his wife can account for some of the hopes they have for her life.

"One of ours is, we don't want our daughter to live with people she doesn't care to live with ... no group home," he says. He and his wife also want her to have access to the latest technology and the Internet, and to have money to pay for visiting her brother at least once a year.

Still, money from the trust can't be used to pay for services that a government program normally covers. For example, if Medicaid pays for 10 hours per day of care but the person needs 20 hours, the trust can pick up what federal assistance doesn't.

All of this planning doesn't mean a special-needs child won't grow up to become an adult with a job.

"We're not lowering expectations or diminishing expectations," Nurse says. For example, Shelby attends college and represents companies that make computer hardware and software to help students with physical disabilities to access school curriculums.

One day, her income may have to be routed to the trust or monitored to prevent her income from interfering with public benefits if she needs them, because many of these programs have income limits, he says. Laws on routing income into a special-needs trust vary by state.

"Our goal for Shelby is not so she can grow up and collect a poverty subsidy," he says. "If she doesn't need it, she doesn't need it."

But the future is uncertain, and families with children who have disabilities must plan for it. "I use the metaphor that this is like a lifeboat. ... Special-needs planning is (like) building the lifeboat," Nurse says.