The Basics
Financial strategies for a child or family member with special needs goes far beyond standard strategies. Families face the dual challenge of covering today’s medical, therapy, and living expenses while also preparing for long-term support — often decades into the future. At the same time, eligibility for programs like SSI and Medicaid is delicate; one wrong move (like leaving an inheritance directly to a child) can jeopardize benefits.
Key Goals in Special Needs Strategies
Cover immediate and ongoing care expenses.
Preserve eligibility for government programs.
Build predictable, lifelong financial support.
Protect siblings and heirs from unfair burdens.
Stretch every dollar with smart tax and account management.
Third-Party SNT: Funded by parents/grandparents (life insurance, annuities, savings). Assets are owned by the trust — not the child — helping protect benefits.
First-Party SNT: Funded with the individual’s own assets (inheritance, settlement). Strict rules apply; remaining funds may be subject to Medicaid payback.
Pooled Trusts: Nonprofit-run option when a private trustee isn’t ideal.
➡️ How I help: Coordinate life insurance and annuity funding to the SNT, align beneficiary designations (to the trust, not the child), and sync with the attorney’s documents so the financial pieces match the legal plan.
Special needs strategies isn’t just structures — it’s ongoing money solutions to free up cash and reduce mistakes.
Medical Expense Deduction (7.5% of AGI): Therapy, psychiatry, medications, transportation to care, and certain physician-recommended schooling/support services may qualify.
“Bunching” Strategy: Time bigger costs (treatment, equipment, home modifications) in one tax year to cross deduction thresholds.
Account Sequencing: Use HSAs/FSAs first, then ABLE, then taxable brokerage or policy loans; tap retirement accounts last to minimize taxes and penalties.
Documentation System: Receipts, mileage logs, and invoices organized so your CPA can capture what’s allowable.
➡️ My Role: Act as a "financial quarterback" — set up the right accounts, map the funding order, track deductible items, and coordinate with your CPA and attorney so more money stays in your plan (I don’t provide tax/legal advice).
Tax-advantaged accounts (akin to 529s) for disability-related expenses.
Contributions allowed up to current IRS limits without disqualifying SSI/Medicaid when used for qualified expenses.
Great for day-to-day needs like housing, utilities, transportation, therapy, and education.
➡️ How I help: Position ABLE alongside the trust: ABLE for routine, qualified expenses; SNT for larger or non-routine items. I help automate contributions, set spending rules, and document usage to protect benefits.
Survivorship Life Insurance: Cost-efficient way to create a larger pool for lifelong care after both parents pass.
Trust-Owned Annuities: Convert proceeds into steady “paychecks” for housing, therapy, or support — reducing the risk of lump-sum misuse.
Structured Payouts: Stagger start dates to align with life stages and care intensity.
➡️ Cash-Flow Controls I add: Provider-pay options for major costs, distribution guardrails in trustee guidance, and an emergency reserve (cash value or liquid brokerage) to avoid hitting retirement accounts during spikes.
Parents want to be fair, but “equal” can leave a vulnerable child exposed.
Strategies
Sibling Equalization: One policy/annuity funds the SNT; a separate policy/beneficiary slice supports siblings.
Caregiver Compensation: Earmark a portion of income (annuity/policy) for the sibling who steps in — travel, time off work, respite.
Legacy Alignment: Incorporate charitable gifts to reflect family values without shortchanging anyone.
➡️ How I help: Model inheritances (with/without SNT funding), set expectations in writing, and create a review cadence so siblings know the plan and their roles.
Even well-meaning families often make small mistakes that have big impacts. Avoiding these pitfalls protects both benefits and family wealth.
Losing Benefits Through Inheritance — direct gifts to your loved one can end SSI/Medicaid instantly.
Outdated Beneficiaries — old policies or accounts that still list the child directly bypass the trust.
Improperly Titled Assets — real estate or joint accounts left uncorrected can disrupt benefits.
Skipping ABLE Accounts — missing the opportunity for tax-free growth and flexible spending.
No Letter of Intent — without clear instructions, future caregivers may struggle with routines and values.
Uncoordinated Family Gifting — relatives leaving money directly can undo years of financial strategies.
Failure to Prepare for Housing — benefits rarely cover full housing needs. Without proper preparation, stability can be at risk.
Trustee or Guardian Gaps — not naming backups can lead to court battles or disruption.
Ignoring Tax Efficiency — paying unnecessary estate or income taxes drains resources meant for care.
Parents often sacrifice their own financial well-being for their child’s needs. But protecting your loved one starts with protecting yourself.
When a child moves into supported housing, families face the cost of running “two households.”
Build a clear spending strategy for both homes.
Separate funds into dedicated accounts for transparency.
Match benefits to covered expenses so family money stretches further.
Unexpected expenses — therapies, housing deposits, equipment — can’t always wait.
Maintain emergency reserves for immediate needs.
Use short-term, penalty-free accounts for flexible access.
Time larger withdrawals for known future costs to avoid tax hits.
Parents often scale back work or retire early to provide care. That creates gaps before retirement benefits start.
Identify shortfalls year by year.
Structure savings or settlement proceeds to cover the “bridge years.”
Avoid draining retirement accounts too soon.
If a parent becomes ill or disabled, the entire family strategy is at risk.
Prepare early to protect assets.
Ensure continuity for both parent and child if caregiving changes.
Ultimately, a strong strategy for your child depends on a strong strategy for you. That means:
Estate Planning — updated wills, powers of attorney, and beneficiaries.
Investments — balanced portfolios that protect and grow wealth.
Life Insurance (including cash value options) — flexibility and protection for both you and your child.
Retirement Planning — steady contributions, even if modest, to secure your future.
Just as on an airplane, you must put on your own oxygen mask first. By protecting your financial health, you ensure your child’s plan remains strong no matter what comes.