The patchwork of government programs for adults with disabilities, and their varying eligibility rules, create complications and traps. But more financial planners are aiming to help.
When she was nearing graduation from Rutgers University in 2005, Melissa Weisz toyed with the idea of becoming a social worker. But as a math geek who had earned a B.S. in finance, she ended up taking a more obvious career path—as a financial analyst and then a financial planner. Now, after 18 years of adult life and challenges (her mother died of cancer, her oldest son is on the autism spectrum), Weisz feels like she’s back doing what she was meant to do—only with a lot of dollar signs and legal twists thrown in.
Weisz is one of a growing cadre of financial pros who specialize in working with families whose children have special needs. “I understand the strain on families, I’ve been there,’’ says Weisz, a vice-president at $6 billion-in-assets wealth manager CI RegentAtlantic in Morristown, New Jersey. “My job as their planner is to integrate—the personal is financial.”
There are good reasons this is a growth area for planners. The number of children with disabilities is rising— the Census Bureau reports 4.3% of children under 18 were identified as having a disability in 2019, up from 3.9% in 2008. Meanwhile, more aging parents are realizing their adult special needs offspring could outlive them; for example, the average life expectancy for someone with Down syndrome is now around 60 years, compared with 28 four decades ago. And with asset allocation and management increasingly digitized, financial advisors are increasingly focusing on planning areas, particularly complicated ones, where humans can prove their worth. Planning for a child with special needs is nothing, if not complicated.
Not surprisingly, many of the financial pros who have gravitated to the area are motivated by their own experiences, too. Chase Alston Phillips, a Washington-D.C. based Merrill Lynch Senior V.P. and planner has focused on planning for those with special needs and long-term disabilities for nearly 15 years. Phillips, 38, was born with spina bifida and leads a team of eight Merrill planners working with special needs families.
“A personal background in the area gives you that passion because let’s be frank, it’s messy,’’ says Weisz. Compared to Phillips, she’s a relative newbie, but is typical of those branching into special needs. While caring for her own mother (who was diagnosed with kidney cancer in 2015 and died in 2019), she started working with seniors. Then, two years ago, she was asked by a colleague to assist a family whose adult child had special needs. She discovered that her knowledge of Medicaid (a factor in both elder and special needs planning); her connections to elder law attorneys who work in both fields; and her years navigating special services for her own son, gave her a running start. She just recently finished up a three-course online study, testing and certification program which leads to a Chartered Special Needs Consultant designation. So far, 800 planners have earned a ChSNC credential, though more have taken at least one of the courses, the American College of Financial Planning, which runs the program, reports.
Aside from looking for those with the ChSNC certification, families can increasingly find help and referrals through nonprofit organizations dedicated to specific diseases. Big investment management firms and banks also generally have specialists on staff, while lawyers who work on special needs, disability law, and elder law, have their own organization, the Special Needs Alliance, whose members have at least five years of experience in this area.
This is not a world with easy, cookie-cutter solutions. “Be careful about following up on ‘standard’ advice because it may not work for you—every situation is different,” warns Martin Shenkman, a veteran estate attorney and Forbes contributor who has written a book on special needs planning. Approaches will vary not only by family resources and by location, but also, of course, by the nature and severity of a disability. Still, financial pros and lawyers offer some general dos and don’ts to get families started.
Families often wait too long. Parents who are independently caring for a child with disabilities at home are often unaware of the time and work it may take to make long-term living and care arrangements for after they’re gone, particularly if they want to make sure their child has the fullest life possible. Worse, there could be unanticipated consequences if a parent should die unexpectedly, without having planned.
For example, a typical grandparent’s will might leave money to a grandchild directly if that child’s parent (i.e. their own child) has already passed away. But if that grandchild has special needs, the direct inheritance could be a costly mistake. That’s because the patchwork of government benefits for adults with disabilities, including Medicaid, Medicaid waiver services (which provide services in the home that helps folks remain in the community) and Supplemental Security Income, carry different eligibility and means tests. In the case of SSI (a federal income support for disabled folks who haven’t worked long enough to qualify for regular Social Security disability) having more than $2,000 of financial assets can be disqualifying.
But there are legal workarounds allowing families to put money in a special needs trust (SNT), or a federally authorized and tax advantaged ABLE account or a group trust run by a nonprofit. Those funds can then be used to enhance beneficiaries’ lifestyle, without sabotaging government help they might otherwise qualify for. “It’s the complexity of multi-generation planning with an extra what if?” observes Weisz.
The government benefits catch is something that even better off families need to think about, says New York estate planning lawyer Bernard A. Krooks, a past president of the Special Needs Alliance. “The cost of caring for an individual with special needs over his or her lifetime can be catastrophic,” he says. “Even wealthy families have to address these issues, ideally by putting a contingency plan in place to let government benefits kick in if and when necessary, for example.” Merrill’s Phillips notes a special “letter of intent” relating to a child’s care can also be used in an estate plan to provide needed flexibility if circumstances change.
Parents often wait too long to plan, underestimating the time and effort needed to assure a special needs adult can live their best life—after Mom and Dad are gone.
A new report from Congress’ Government Accountability Office gives just a taste of the kind of expenses we’re talking about. It looks at six states whose Medicaid programs provided in-home services (everything from health care to help with eating, dressing and bathing to supported employment) for beneficiaries aged 21 to 64 who have intellectual disabilities or developmental delays; the states’ spending on these recipients averaged between $51,000 and $71,000 a year–an amount pushed up by those with additional physical, mental health and substance abuse problems.
Note that those Medicaid services have (in addition to eligibility restrictions) long waiting lists, which is why families with sufficient financial means should be making any preparations they can on their own. Another gotcha to be aware of: eligibility rules for Medicaid benefits have not only changed over time, but vary by state. “It’s important to seek out experts dedicated to special needs planning in the state where you’re located,’’ Krooks says.
It Takes A Team
“Holistic, broad financial planning can be really critical,’’ says Shenkman. In other words, even a lawyer says just going to a lawyer and setting up an SNT doesn’t cut it. Financial planners acknowledge they can’t go it alone either. “Building the right team of professionals is incredibly important: The problem is that looking for just one person to solve problems and answer questions doesn’t really work,” says UBS advisor Kevin McGrath, who, with his daughter, runs a financial planning practice in Atlanta focused on special needs. (Both hold the ChSNC credential.)
Still, planners tend to be at the center of the action. “We’re often the first call for families and like to be the quarterback of their advocacy and support team,” says Merrill’s Phillips. “We’re at the center of people’s professional teams—often attorneys, doctors and other experts don’t really talk to each other, so with the right advisor a family doesn’t need to be alone in the middle of all of this,” echoes Weitz.
ABLE accounts, created in 2014, offer tax breaks and a way for parents to help support a disabled adult child, without jeopardizing their eligibility for federal Supplemental Security Income.
Another reason planners are in the middle: parents of special needs children have to save and plan for their own retirements, even as they provide for their child’s long-term care after they’re gone. Insurance policies can be an effective tool for funding SNTs, Weisz notes.
A few other members of this team effort are crucial: the person (or institution) who will serve as a trustee for any SNT or other trust when the parents are gone, as well as a potential guardian, if needed. “The knee-jerk reaction is to appoint Uncle Joe or Aunt Jane, but the rules around SNTs are not simple,” says Shenkman. He suggests families consider naming an institution or specialist as a trustee or co-trustee with a family member, to make sure there is no inadvertent disqualification from public benefits. He also sees a need in many cases for an advocate who can help the child with life and health decisions, particularly if there isn’t someone (such as a sibling) with the time and capacity to fill that role.
Look Beyond Special Needs Trusts
A Special Needs Trust isn’t always the answer—or it can be just part of the plan, supplemented by other accounts. For example, an adult child with special needs may have a job and be earning too much for public benefits, but not enough to cover all their expenses, particularly in the long term. In that case, says Shenkman, the solution may be a full discretionary trust, giving the trustee the flexibility and discretion to disperse what’s necessary for the special needs individual’s support. (An SNT is designed to pay what isn’t covered by Medicaid.)
Obviously, much depends on the nature and outlook for a child’s disability. In an article on planning for those with Asperger’s Syndrome, for example, Shenkman suggested that someone who is capable of holding down a good-paying job, might be able to serve as their own co-trustee–provided a separate co-trustee or a trust protector is named. Why? While anyone can be the victim of financial fraud, the characteristics of Asperger’s, which makes it difficult to interpret social cues, could make a person even more susceptible, no matter how competent they are on the job.
“It’s not a one size fits all approach—what benefits the person is receiving or which benefits may they need in the future will ultimately decide whether it is right,” says Phillips. He points to ABLE accounts as an underutilized vehicle for families to save for disabled children that works along with an SNT, while offering some unique tax advantages. The money in an ABLE account (also known as a 529A) grows tax free, just as the money in a 529 college savings account does, provided it’s used for its intended purpose—in ABLE’s case benefits or support for a disabled person, which broadly includes housing, food, education, transportation, assistive technology, health care and personal services. In other words, just about anything.
“Having someone aware of the planning complexities who can point you in the right direction is key.”
When Congress created ABLE accounts in 2014, it specifically provided that up to $100,000 in an ABLE would be disregarded for the purposes of determining a beneficiary’s eligibility for SSI. So, for example, rather than paying an adult disabled child’s rent directly—which would count as income to them and hurt their SSI eligibility—a parent could make annual contributions to the 529 and rent could be paid from that account. In 2023, parents or others can contribute, in total, up to $17,000 per beneficiary, an amount that increases when the annual gift exemption is adjusted for inflation. Alternatively, that amount can be rolled each year from a regular 529 established for a beneficiary (or a family member) to the ABLE. (Each beneficiary can only have one ABLE account, although an account can be transferred from one state plan to another.) A disabled person who works can also, in some cases, make contributions to an ABLE account to fund their own future needs.
As with regular 529s, states are the sponsors of ABLE accounts, but they’re privately administered and you don’t have to stick to your own state’s plan. (For example, Fidelity Investments runs the Massachusetts plan and offers it nationwide.) Note that these accounts can hold as much as the state allows in a 529 (from $235,000 to $550,000), but only $100,000 is disregarded in the asset tests for government benefits. Last year, Congress passed changes that kick in in 2026 and will make ABLE accounts available to those who become disabled before the age of 46. Currently, only those who are disabled before 26 qualify. (The account does not, however, have to be set up before those ages.)
One advantage to an ABLE account (in addition to the tax benefit) is it costs less to set up and administer than an individual SNT. McGrath points to another option that also may have lower costs and make sense for families with fewer assets—a pooled SNT, which is typically sponsored by local or national nonprofits.
Indeed, McGrath notes that most of the calls he gets end up with him simply connecting callers to the right resources, experts, and institutions—without taking them on as clients or charging them. “Having someone aware of the planning complexities who can point you in the right direction is key,” he says.
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