Parents of special-needs kids must plan for current, future financial demands

Niesha Lofing

Moms and dads plan for family trips, college and weddings, but life sometimes throws a curve called autism.

And it’s hitting more and more families. An average of one in every 110 children in the United States has an autism spectrum disorder.

These neurodevelopmental disorders can make communication and social interaction difficult, sometimes impossible, for those who struggle with them.

Autism poses yet another challenge for parents, though, one that requires a different set of experts. Parents must pencil out how they will pay for everything that is needed – sometimes for a child’s lifetime.

Medical costs alone can be staggering. While a typical American spends about $317,000 for direct medical costs in a lifetime, a person with autism may pay almost double that figure.

What are parents to do? Plan, say attorneys and financial advisers. If they don’t, probate court battles could last for years and leave scars for their children and surviving relatives.

“A lot of people put off this kind of planning because you’re talking about death and disability,” said Brian Wyatt, a Sacramento, Calif., lawyer whose specialty is special-needs planning. “No one is going to do as good a job as the parent, but if the parent does the planning, their thoughtfulness can live beyond them.”

Take a deep breath, then assemble your team.

“The earlier people get started on this, the better off they’ll be, because it’s more time that they’ll have to achieve their goals,” Wyatt said. A comprehensive plan can be executed in a matter of weeks and will cost $2,300 to $4,500, or more.

It takes a village to raise a child. In the case of a child with an autism spectrum disorder, the villagers will carry titles such as designated guardian, financial planner, special-needs planner or estate planning attorney.

Whatever their titles, these professionals should put their clients at ease and advise them of all the options. They will have a list of questions to ask and will be able to tailor a plan to any family’s situation.

How do you find professionals to help you?

Talk with other parents who have children with autism or other special needs. See whether your child’s doctor has recommendations. Ask friends to ask attorneys for suggestions.

Seek estate attorneys and financial planners who have past experience working with families with special-needs children. Often, they will have ties to the Academy of Special Needs Planners or other specialized professional organizations.

“If the attorney is really devoted to this type of planning, they’ll have invested in that type of relationship,” Wyatt said.

Ask the professional how many special-needs plans they’ve done and if they can offer references from clients, he said.

If you don’t have anyone you can ask, contact the local bar association for attorney recommendations. At www.cfp.net and www.fpanet.org, you can search for financial planners by ZIP code.

Once you find planners, interview the prospects. You can also get tips on how to interview them at the above websites. Many of these questions will work when interviewing attorneys or other professionals. Among them:

- Will they provide their licenses, registrations and their disciplinary history? Any business person should be comfortable sharing this information, and you should check out the information with the state once you get it.

- Seek information on their education and experience.

- Also, do they receive a salary, or will they charge you a fee? Do they receive a commission off their sales? You have a right to know how they are paid and whether they have compensation arrangements with individuals whom they recommend. Such arrangements are not unusual or illegal, but you should be aware of them when offered service alternatives.

- Finally, discuss their philosophy on financial or legal planning and the range of services they offer.

Name a guardian – this choice is crucial.

Parents will want both a guardian for their child and a guardian for the estate, said Elizabeth Ikemire, a Sacramento attorney and expert in special-needs trusts.

Parents will want a guardian for their minor children to eliminate the risk that a guardianship battle between family or friends is waged in court, where a judge – not you – will decide who would care for your children.

When naming a guardian, parents may want to consider those who share similar views or religious beliefs.

“Ask yourself ‘Who would we feel would be the best person in our lives and family structure to care for our child?’ ” Ikemire said.

Guardianship ends at age 18, however, so depending on the severity of the child’s disability, a conservator may need to be named to help with caretaking and making health-care decisions.

The guardian of the estate, or trustee, will care for the beneficiary’s financial matters, so look for people whose honesty and integrity are unimpeachable.

“They don’t have to be a financial whiz, but they have to be prudent decision-makers,” Ikemire said.

The same person can be named guardian of the person and estate. That’s what Neal and Kristin Hinson, of Lincoln, Calif., have done. Two of their sons, Justin, 7, and Simon, 4, have been diagnosed with autism spectrum disorders. Noah, 1, is exhibiting signs of autism. Their 9-year-old daughter, Millie, is a typically developing child.

The Hinsons selected Fred and Rodna Hinson, Neal’s parents, to be both guardians and trustees for their four children. If something happened to Neal and Kristin Hinson while their children were minors, they know his parents would rear their kids with love and devotion.

“We have so much trust and faith in them and their ability to raise our children,” Kristin Hinson said.

Start saving today

Every child is different, and so are the financial needs for their long-term care.

Joel Larsen, principal of Davis-based Navion Financial Advisors, called it: “the who, what, when, where and how of care delivery.”

A financial planner will help determine a figure based on the severity of your child’s disability. This evaluation will need to be reassessed as part of scheduled financial checkups.

Parents sometimes assume a family member will be the caregiver after they’re gone. If a special-needs child needs care into adulthood, that may not be realistic. Hard choices will have to be made about who will provide the best care.

“Typically,” Larsen said, “that’s an institutional caregiver, and how do we pay for that?”

The parents, along with their adviser, should provide those answers in an in-depth and comprehensive plan, Larsen said.

Again, start with what you have and build up. Don’t over commit and get into trouble.

The Hinsons have already started. Neal Hinson funnels a portion of his income – times four – into a tax- sheltered mutual fund each month for his children’s college.

The couple hope all their children will live out a typical adulthood, thanks to early intervention programs at the UC Davis MIND Institute and therapy programs through community resources.

“We’re saving for their future, but we’re planning on them being able to support themselves by us investing in them at a young age,” Kristin Hinson said.

Her husband also buys two $100 savings bonds each month, to be used if their boys decide to go on a two-year Mormon mission, as he did when he was a young adult.

The father of four researched college savings plans online, choosing the vehicle he did in case the funds needed to be used for something other than education.

“Right now they’re coming along in school, but it’s a very real possibility,” Neal Hinson said.

Trust in a trust

If parents own a home or have any assets they want to pass to a child with special needs, they should establish a living trust, a special-needs trust and designate a trustee.

While a living trust would allow assets to pass from parent to child, that kind of inheritance could interfere with government benefits that a child may be receiving.

If a child has even a few thousand dollars in assets, they may be disqualified from receiving federal Supplemental Security Income, Medicaid or state residential programs. A special-needs trust can protect inherited funds for the child’s care and outline a care plan.

It also restricts what the trustee can do with the money, Ikemire said. The special-needs plan also should include a document called a letter of intent, which should be updated regularly to include all the daily needs of the child, such as medical history and therapies, Wyatt said.

An attorney should go over the benefits and drawbacks of the various types of special-needs trust: A seed trust, for instance, can be funded with a nominal amount. Then the parents or their family members can continue to make contributions to it. Inheritances also may be funneled into it. If the trust’s beneficiary dies before all funds are used, the money would remain in the family. This can be especially important if more than one child is disabled.

Sometimes people are unwilling to talk to other family members about a seed trust, but people with large extended families may find that their relatives were looking for a way they could help.

“It should be talked about as a means to provide a benefit to those children,” Ikemire said. “Even if people were giving a little bit, then there would be a means to do that.”

Doing nothing is the worst idea, since a parent’s assets would wind up in probate. It’s the most expensive plan, all done in open court. Estate planning attorneys said that such cases can take years to resolve and lead to acrimonious family divisions, often placing a disabled person in an untenable situation.

The Hinsons worked with a military attorney on base to draft their trust years ago. Theirs is a living trust. Setting up a special-needs trust isn’t something they had thought about.

“Maybe because we’ve been in denial about there being something different about our kids,” Kristin Hinson said. “We fully expect our kids to go to college and get jobs, but that’s probably something we should discuss. At least one of our kids may struggle a little more in the future.”

Take out insurance

Most people understand that, if their family has one major breadwinner, that person should have disability and life insurance policies. If the breadwinner dies, the family must bear not only the emotional loss of a loved one but also the financial support that person wanted to provide their children.

Many families fail to calculate the value of services rendered by a stay-at-home parent. Experts at the American Council of Life Insurers in Washington, D.C., suggested that parents work with a life insurance agent or financial planner to assess the costs of providing care to their children, reviewing the cost of individualized education services, the salary of a home-care worker, medical expenses and other factors.

Kristin Hinson, for instance, has been trained by researchers at the UC Davis MIND Institute to teach social and communication skills to the couple’s three sons. Who would do that if she were not there?

Life insurance helps to pay for such costs or to supplement Neal’s income if he has to take time off.

“Some experts suggest that breadwinners should purchase between 7 and 10 times their annual income in life insurance protection,” said Steven Brostoff, associate director of media relations at the American Council of Life Insurers in Washington, D.C. “But every family is different.”

If a family has one child or more with special needs, Brostoff said, such rules of thumb should be adjusted.

When parents invest time and effort into this planning, they find it has lasting value.

“The most common thing I hear from families comes at the end of the process, when people say ‘I’m so glad we finally did this – we have peace of mind,'” Wyatt said. “They know they’ve accomplished something that will live beyond them for generations.”