Planning for financial future of special needs son

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Jackson12
Posts: 889
Joined: Tue Oct 06, 2015 9:44 pm

Planning for financial future of special needs son

Post by Jackson12 » Fri Feb 19, 2016 4:42 pm

First of all, if it was not for our special needs son we wouldn't worry too much about leaving an inheritance . Our other children, now adults, are self supporting and competent. But I can hardly sleep at night because I worry about the future of our special needs son..after we are gone.

We have managed to put aside $350 000 for him and it is in a trust. We are hoping it will grow but it has remained flat because we didn't really know how to invest it. We will be making changes in hopes of boosting reforms as he has some time on his side. He is in his 20s.

I have been reading everything I can here to,up my learning curve.,He will always need supervision. While he has a part-time minimum wage job, he can not balance a checkbook or hold a job that pays enough to cover even modest loving expenses.

Unfortunately, he falls through the cracks in the system for meeting government assistance as a disabled person. The reasons are complex but the bottom line is that he doesn't qualify even though he qualified for vocational rehabilitation. The rules are different for each program.

We have worked hard on life skills and he has come a long way but still needs much help and supervision.

.
We have set up our will and estate plan terms and delegated a trustee who must follow terms of the trust. The main challenge is figuring out how to leave sufficient funds for him while also covering our retirement costs ( some of which will go to his support) And if our cognitive ability slips wth age he may need outside assistance even before we die ( as will we).

Any advice would be appreciated. How do we maximize what we leave to our son? We are thinking that downsizing could help free up extra funds for his trust but that is an off the cuff idea.

fnmix
Posts: 188
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Planning for financial future of special needs son

Post by fnmix » Sat Feb 20, 2016 3:49 pm

Hi Jackson12,

First of all my sympathies for what has to be gut wrenching to deal with. I am not in a similar situation, but expect to be dealing with a (half) similar situation as my parents age.

My perspective:
  • Maximizing comfort for your special needs is coincident with maximizing your income/assets. It is also coincident with you savings rate.
  • Downsizing the house and in general one's expenses/lifestyle if it can be done without adversely affecting your health or income is a positive step towards increasing your savings (for your son).
  • For the money that you have already saved for your son, https://www.bogleheads.org/wiki/Three-fund_portfolio should be a good starting point. you can vary the proportion based on your projected life expectancy (between now and then would be accumulation period) and the additional number of years that your son is expected to live beyond you (the draw down period). The numbers are ofcourse guesses, but one needs some framework to make a plan.
Some questions that might other bogleheads frame a reply:
  • What is your current age (approx.)? And when do you expect to retire?
  • Are you able to continue working in some capacity beyond retirement? (i.e. when you retire only semi-retire)
  • Are your other children in a position to help?
Finally, I wanted to commend you on soliciting ideas from this forum to make a plan. Keep at it!

carolinaman
Posts: 3148
Joined: Wed Dec 28, 2011 9:56 am
Location: North Carolina

Re: Planning for financial future of special needs son

Post by carolinaman » Sat Feb 20, 2016 4:14 pm

I am very sorry to hear of your son's situation. We have a special needs granddaughter who is 14. She is more limited than your son in her abilities and does qualify for some services now even though my daughter and SIL have a good income. They are in mid 40s so hopefully have time to figure this out. I do not know how they intend to deal with it. I plan to leave some inheritance to her and I think her other grandmother may as well.

These are difficult challenges. My fervent prayer and hope is that our granddaughter will be happy, loved and well cared for (she is now). Best wishes.

Jackson12
Posts: 889
Joined: Tue Oct 06, 2015 9:44 pm

Re: Planning for financial future of special needs son

Post by Jackson12 » Sat Feb 20, 2016 4:58 pm

Jnmix, you asked these questions:


1. What is your current age (approx.)? And when do you expect to retire?
Current age for me: 63 Current Age for spouse: almost 64.

2. Are you able to continue working in some capacity beyond retirement? (i.e. when you retire only semi-retire)

That is the game plan, at least for my spouse, i will work IF we can downsize and if my son takes up less of my time. I am currently helping him find a full-time job.
He currently has a part-time job but with irregular hours from week to week and no benefits. It took much effort to find even that job.

We are hoping my spouse can work to at least 70 ( he loves his job) but we also know we face a worse case scenario,because the statistics seem to indicate that few people can hold out to 70. if health permits, he hopes to work at least part-time after retirement. That is allowed after full retirement age ('as I understand it)

3. Are your other children in a position to help?
Not at this time.They have stable jobs but one son has 2 young children and a wife who is not yet working because when tney crunched the numbers her salary would basically cover only day care . Tney are under water on their mortgage.. Their budget has no give.

The other son is married and would be making a great salary except for the high cost of living in his area of the country. His wife supported them until he found a job but now is going to school and working part-time. She is taking the maximum number of classes allowed to graduate early and has a student loan.,Their budget has no flexibility. They recently bought a house ( which think is a mistake but it is their choice )


.
We have been putting every extra dollar towards payments on the car our special needs son drives - and we also contribute to our retirement fund. His car payments are the ONLY debt in our family and he doesn't earn enough to cover car insurance and car payments. I do not know if paying off the car is wise but I hate debt. Also, if the car was paid off, he could cover car insurance.

one factor I forgot to mention: (b/b) our son is currently covered for health insurance under my spouse's family plan. When he is 26 years old that coverage will end and premiums will be significantly higher. We hope that is at least parly offset by the part of Medicare my spouse can have while still working,I think it is Part A.

Sorry this is so long. I am still researching health insurance optioms for our son. The premiums are daunting.

Jackson12
Posts: 889
Joined: Tue Oct 06, 2015 9:44 pm

Re: Planning for financial future of special needs son

Post by Jackson12 » Sat Feb 20, 2016 5:14 pm

[quote="carolinaman"am very sorry to hear of your son's situation. We have a special needs granddaughter who is 14. She is more limited than your son in her abilities and does qualify for some services now even though my daughter and SIL have a good income. They are in mid 40s so hopefully have time to figure this out. I do not know how they intend to deal with it. I plan to leave some inheritance to her and I think her other grandmother may as well.

These are difficult challenges. My fervent prayer and hope is that our granddaughter will be happy, loved and well cared for (she is now). Best wishes.[/quote]

Thank you'. As you know , no one plans for this. We are planning to see a special needs lawyer. Maybe we were in denial but it seemed like we could cover the finances needed for speech therapy and other therapies ( which took up nearly all my time) and still have enough savings to afford his needs and our retirement expenses.

We may still afford retirement but not all his expenses after we are gone. If I think about this, I am in tears so I focus on being strong and researching options.

I also feel very guilty because one son will be a trustee ('with specific instructions per our will ) and we did not foresee that he would have to supervise our son. I wonder how he will manage that and hold a full-time job. It will be a great responsibility for him. But I have to trust that he will come through. Family is important to him and we are close.,

Jackson12
Posts: 889
Joined: Tue Oct 06, 2015 9:44 pm

Re: Planning for financial future of special needs son

Post by Jackson12 » Sat Feb 20, 2016 5:29 pm

I also forgot to mention that our home needs updates before selling. As much as I hate debt, I do not know how to afford this without a home equity loan. We are frugal so outdated bathrooms and other spaces did not bother us. We have the attitude of " use it as long as it is functional."

We bought the house over 20 years ago for $160,000. It was a buyer's market and the house was cluttered and did not show well but it was well maintained. It is over 3000 square feet and was a deal.

But now it seems too expensive to maintain. Even though it is in a good neighborhood, we could get at most about $300,000 for it. Those are the comps for our street. One house got over $400,000 but it was completely updated with high end products.Homes simply do not appreciate much here.

Of course we would get the seller"s deduction so that would help. And I saved all home improvement receipts.

Miriam2
Posts: 2209
Joined: Fri Nov 14, 2014 11:51 am

Re: Planning for financial future of special needs son

Post by Miriam2 » Sat Feb 20, 2016 6:52 pm

Jackson12 -
We understand your situation as we are in the same boat. We were always too hopeful that our son with special needs would be able to survive in life with all his good strengths and capabilities. Then it became apparent that even with his strengths, he might not be able to earn a decent living wage throughout his life. Then we panicked - for some reason WE got older :shock: and we had not really prepared for all problems that could arise when we became dearly departed. And by then the coffers were dry because we had spent so much on all the therapies, tutors, testing, counselors, special education, etc. etc. to get him where he is today - well worth every penny, we are very proud of him :happy
Jackson12 wrote: . . . As you know , no one plans for this. We are planning to see a special needs lawyer. Maybe we were in denial but it seemed like we could cover the finances needed for speech therapy and other therapies ( which took up nearly all my time) and still have enough savings to afford his needs and our retirement expenses.
We may still afford retirement but not all his expenses after we are gone. If I think about this, I am in tears so I focus on being strong and researching options.
I also feel very guilty because one son will be a trustee ('with specific instructions per our will ) and we did not foresee that he would have to supervise our son. I wonder how he will manage that and hold a full-time job. It will be a great responsibility for him. But I have to trust that he will come through. Family is important to him and we are close.
You're doing the right thing by focusing on being strong and researching options. We were all in denial. Take advantage of every window of opportunity that opens. Keep the family warm and together :happy

Perhaps others on this forum can help with your budget and house ideas, but I can offer some suggestions on the personal financial front.

Our basic plan is to teach our son to be able to do it all by himself. Especially financially - because without a financial floor or cushion it's hard to live - to teach him how to manage his finances himself so that he will not have to rely on others to do it for him. And if others help him, at least he will be financially educated enough to know whether their help is real "help" or they are taking advantage of him.

I have discussed my plan of attack in other threads that I'm linking here. Since your son is working, you may have the opportunity to front load his tax advantaged and taxable accounts to the max. Our son is working now and whenever he has worked, he puts EVERY PENNY he earns (except reasonable burritos & beer money :wink: ) in his taxable account at Vanguard and we put EVERY PENNY to the max to fund his Roth IRA at Vanguard, and now he has a 401k (I kiss the paper it is written on) and he puts EVERY PENNY to the max in it and in his HSA account from his paycheck.

My feeling is this - while possible, take advantage of this window of opportunity - just put EVERY PENNY into those accounts so the accounts have the magic of time to compound up and up and up - so that when we are gone and he is on his own, at least he has those accounts. And since some of them, the 401k and the HSA must come directly from his paycheck, we could never fund them, we can only help him fund the Roth IRA and the taxable. So while he is working with a 401k, he puts the max in the 401k and lives at home and we pay most of his expenses. I simply cannot see making him pay rent and lose the 401k opportunity. Next year he may not be so lucky with a job. (also, the reality is, he cannot live on his own yet)

The more HE can save, the less anxiety and worry we have. He develops good financial habits. And the less we worry about not having huge life insurance benefits to fund a trust for him.

Portfolio advice for family with special needs child
Which is most tax efficient balanced fund in taxable
Help for taxable account for 24 YO
Maximum recommended funding for special needs trust
Amount to be set aside for special needs trust

There are many Bogleheads in the same boat. Use the search engine in the upper right and pull up other threads.

Hope this helps :happy Good luck,
Miriam2

fnmix
Posts: 188
Joined: Sun Sep 09, 2012 4:50 pm
Location: Northern California

Re: Planning for financial future of special needs son

Post by fnmix » Sat Feb 20, 2016 8:08 pm

Hi Jackson12,

Thanks for taking the time to provide additional details.

Assuming that your selling price is $300K and that you spend 1% of this on upgrades so that the house shows well and another 6% on various commissions, you will end up with ~$280K. How much could you buy a new place for in your geography?

Here are a couple of ideas to consider:
  • Rent one of the rooms (or otherwise a portion of the house) to generate extra income in the current (large) house. Say via Airbnb or similar.
  • If you sell the current place and get a new one, it may help to have an extra bedroom for a helper to stay in. (My spouse's grandmother does this).

User avatar
dm200
Posts: 17284
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Planning for financial future of special needs son

Post by dm200 » Sat Feb 20, 2016 8:55 pm

I wish you all very well.

It is my understanding that the details on these special needs trusts for special needs individuals, such as your son, can vary by state. It is vital, then, that you have consulted an attorney experienced in your state's details. It could also be (I would bet on it) that some of the qualifications for various government programs (sate, federal, local) may change over time - so it may make sense to build some flexibility into the plan(s)

it seems to me that you need the flexibility to both provide for him and your own needs.

If your son is employed, does that help with health insurance availability?

What about support groups (or similar) for parents/adult children in similar situations?

Might a "Group home" for your son be a possibility in the future? One type of group home that I am very familiar with (two are located within 2 blocks of our house) is L'Arche. http://larche-gwdc.org/ If there are L'Arche homes in your area, you might see whether one of them might be an eventual fit. The "Quality of Life" for disabled adults in these L'Arche homes is (to me at least) is so much better than any other environment I have encountered.

User avatar
dm200
Posts: 17284
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Planning for financial future of special needs son

Post by dm200 » Sat Feb 20, 2016 9:04 pm

Unfortunately, he falls through the cracks in the system for meeting government assistance as a disabled person. The reasons are complex but the bottom line is that he doesn't qualify even though he qualified for vocational rehabilitation. The rules are different for each program.
Navigating the qualifications for programs that provide assistance can be daunting and complex. I have little experience in doing this, but (from observation) it seems that some folks are more successful than others for what seem to be similar "situations" of disability/need. There are the often conflicting requirements for meeting the requirements, while not doing or having something that disqualifies him. My sister-in-law, over the years, seems to have had the ability to help many folks in qualifying for programs.

bsteiner
Posts: 3390
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Planning for financial future of special needs son

Post by bsteiner » Sat Feb 20, 2016 9:44 pm

Jackson12 wrote:... We have managed to put aside $350 000 for him and it is in a trust. ...
...
We have set up our will and estate plan terms and delegated a trustee who must follow terms of the trust. The main challenge is figuring out how to leave sufficient funds for him while also covering our retirement costs ....
This seems inconsistent. You would only create the trust now if you expected to have a taxable estate (more than $5,450,000 (indexed) per person or $11.9 million (indexed) for a couple). If you didn't expect to have a taxable estate you would wait until death and create the trust in your Wills in order to get the basis step-up for the assets at death.

User avatar
in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: Planning for financial future of special needs son

Post by in_reality » Sat Feb 20, 2016 9:52 pm

bsteiner wrote:
Jackson12 wrote:... We have managed to put aside $350 000 for him and it is in a trust. ...
...
We have set up our will and estate plan terms and delegated a trustee who must follow terms of the trust. The main challenge is figuring out how to leave sufficient funds for him while also covering our retirement costs ....
This seems inconsistent. You would only create the trust now if you expected to have a taxable estate (more than $5,450,000 (indexed) per person or $11.9 million (indexed) for a couple). If you didn't expect to have a taxable estate you would wait until death and create the trust in your Wills in order to get the basis step-up for the assets at death.
Is that really a safe plan though? If the estate gets hung up in probate (for whatever reason), the trust might not be funded immediately (or am I wrong on this).

It's not about taxes but about having the money available smoothly. Wouldn't having a trust now do that better?

User avatar
dm200
Posts: 17284
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Planning for financial future of special needs son

Post by dm200 » Sat Feb 20, 2016 10:19 pm

bsteiner wrote:
Jackson12 wrote:... We have managed to put aside $350 000 for him and it is in a trust. ...
...
We have set up our will and estate plan terms and delegated a trustee who must follow terms of the trust. The main challenge is figuring out how to leave sufficient funds for him while also covering our retirement costs ....
This seems inconsistent. You would only create the trust now if you expected to have a taxable estate (more than $5,450,000 (indexed) per person or $11.9 million (indexed) for a couple). If you didn't expect to have a taxable estate you would wait until death and create the trust in your Wills in order to get the basis step-up for the assets at death.
Whether (and if so how) to set up the trust now or later, in my opinion, should be based on the specifics of the overall situation - according to the information and advice of an experienced estate planning attorney (who is also experienced in special needs trusts)

2stepsbehind
Posts: 889
Joined: Wed Jun 20, 2007 10:03 am

Re: Planning for financial future of special needs son

Post by 2stepsbehind » Sun Feb 21, 2016 8:17 am

Jackson12 wrote:First of all, if it was not for our special needs son we wouldn't worry too much about leaving an inheritance . Our other children, now adults, are self supporting and competent. But I can hardly sleep at night because I worry about the future of our special needs son..after we are gone.

We have managed to put aside $350 000 for him and it is in a trust. We are hoping it will grow but it has remained flat because we didn't really know how to invest it. We will be making changes in hopes of boosting reforms as he has some time on his side. He is in his 20s.

I have been reading everything I can here to,up my learning curve.,He will always need supervision. While he has a part-time minimum wage job, he can not balance a checkbook or hold a job that pays enough to cover even modest loving expenses.

Unfortunately, he falls through the cracks in the system for meeting government assistance as a disabled person. The reasons are complex but the bottom line is that he doesn't qualify even though he qualified for vocational rehabilitation. The rules are different for each program.

We have worked hard on life skills and he has come a long way but still needs much help and supervision.

.
We have set up our will and estate plan terms and delegated a trustee who must follow terms of the trust. The main challenge is figuring out how to leave sufficient funds for him while also covering our retirement costs ( some of which will go to his support) And if our cognitive ability slips wth age he may need outside assistance even before we die ( as will we).

Any advice would be appreciated. How do we maximize what we leave to our son? We are thinking that downsizing could help free up extra funds for his trust but that is an off the cuff idea.
Was your son disabled before age 22 and there is sufficient documentation to support that? If so, he will be eligible to receive a "child's" benefit under the parent's social security record (75% of your benefit). Have you looked into applying for medicaid?

Jackson12
Posts: 889
Joined: Tue Oct 06, 2015 9:44 pm

Re: Planning for financial future of special needs son

Post by Jackson12 » Mon Feb 22, 2016 1:31 am

I'm sorry I haven't responded quickly to all the wonderful posts. I had a small virus which kept me temporarily out of commission. I'm back up to speed now. And I am extremely grateful for everyone's' input.

For those who asked about health insurance, my son only has a part-time job without benefits but the search is on for a job with benefits. We would be thrilled if that happened.
He did have a job for several years which was steady but didn't have benefits. However,he made enough to fully cover his car payments, gas, and his portion of auto insurance.

That isn"'t the case now so we are partly subsidizing his auto expenses (insurance) Luckily he is a safe driver ( although slow because he is overly cautious). The main issue he has with driving is his inability to remember how to get anywhere, at least without weeks of practice - and even with the aid of a GPS. For his current job , it took nearly a month for him to reliably get to and from work. But he is fine now.

He also had to pass an evaluation for drivers who are special needs. He passed it on the second try.

Because of his employment status, an HSA isn't currently an option (plus,the fact that he is still covered under my spouse's insurance, currently the least expensive option).

Even thought we have a will and estate plan, we also plan to meet with a special needs lawyer who can help us tweak things to help meet the needs of our son.

Thanks very much for the links to other articles relating to special needs issues. They have been extremely helpful. Everyone's kindness, support, and information is greatly appreciated and I am more grateful than I can express well with a simple response here.

We do have term insurance with our son as a beneficiary (but with a trustee per he terms of our will)

We also have long-term health care and the premiums have held steady. We have mixed emotions about paying the premiums ( should we be putting the money elsewhere for our son's benefit) .

The premiums are actually less if we include our son (which we do) since the total amount of premiums for the family plan are less than premiums for only 2 imdividuals. So each one of us is individually covered for about $350,000 nursing home or at-home care.

While our son is unlikely to need long-term health care immediately it simply seemed to make financial sense to save on premiums and include him. Premiums for our long-term care plan are a bit like cable in our part of the country;if you ask for LESS options ( no channels, only a wireless connection( they try to charge MORE..

It is a long-term care Partnership plan which not only means that premiums are partly) tax deductible but also allows participants to go on Medicaid - if that becomes necessary - without divesting all assets. Participants can leave significant assets to remaining family members.

We figure the long-term care insurance is a shot in the dark but I saw my parents and another relative who would have benefited financially from years of insurance. I stepped into care for them and I don't want my adult children to have the same financial burden.

supersharpie
Posts: 652
Joined: Wed Dec 22, 2010 1:28 pm

Re: Planning for financial future of special needs son

Post by supersharpie » Mon Feb 22, 2016 5:07 am

Once you or your wife start collecting Social Security your son can apply for a Childhood Disability Benefit which is equivalent to 50% of your full retirement age retirement benefit. Your own benefit will not be reduced if he is approved. This is different from the SSI program that takes into account your son's income and assets.

User avatar
Toons
Posts: 12874
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Planning for financial future of special needs son

Post by Toons » Mon Feb 22, 2016 5:13 am

"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

carolinaman
Posts: 3148
Joined: Wed Dec 28, 2011 9:56 am
Location: North Carolina

Re: Planning for financial future of special needs son

Post by carolinaman » Mon Feb 22, 2016 7:32 am

Good articles Toons. Thanks

User avatar
Toons
Posts: 12874
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Planning for financial future of special needs son

Post by Toons » Mon Feb 22, 2016 8:10 am

carolinaman wrote:
Good articles Toons. Thanks
My Pleasure,,,
Best :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Jackson12
Posts: 889
Joined: Tue Oct 06, 2015 9:44 pm

Re: Planning for financial future of special needs son

Post by Jackson12 » Mon Feb 22, 2016 11:42 am

supersharpie wrote:Once you or your wife start collecting Social Security your son can apply for a Childhood Disability Benefit which is equivalent to 50% of your full retirement age retirement benefit. Your own benefit will not be reduced if he is approved. This is different from the SSI program that takes into account your son's income and assets.

I will look into this and see if he meets the criteria and hope that it will be more flexible than the state requirements..which is possible. We are also keeping a sharp eye on the ABLE program, still in development but with possible promise.,he was diagnosed as having special needs in childhood but was kept in a regular classroom ( with an IEP) until high school when it became clear that modified classes were necessary and no IEP modifications would be enough to take regular classes.

He does have some physical issues and a diagnosis since he was 4-5 ...so,here's hoping.

Jackson12
Posts: 889
Joined: Tue Oct 06, 2015 9:44 pm

Re: Planning for financial future of special needs son

Post by Jackson12 » Mon Feb 22, 2016 11:55 am

supersharpie wrote:Once you or your wife start collecting Social Security your son can apply for a Childhood Disability Benefit which is equivalent to 50% of your full retirement age retirement benefit. Your own benefit will not be reduced if he is approved. This is different from the SSI program that takes into account your son's income and assets.

I looked at the Social Sexurity page and these are some of the requirements:
You cannot do work that you did before;
We decide that you cannot adjust to other work because of your medical condition(s); and
Your disability has lasted or is expected to last for at least one year and result in death.

I don't think he meets the criteria. He does have a hearing loss in one ear but not both ears. That- and an intelligence test- was enough for vocational rehab. But SS seems stricter and doesn't seem to factor in severe cognitive disabilities.

I could be wrong. I need to ask them.

Post Reply