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Welcome to personal finance for long-term investors, where we believe Benjamin Franklin's advice that an
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investment in knowledge pays the best interest both in finances and in your life. Every episode teaches you personal
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finance and long-term investing in simple terms. Now, here's your host, Jesse Kramer. Welcome to Personal
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Finance for Long-Term Investors, episode 119. My name is Jesse Kramer. By day, I
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work at a fiduciary wealth management firm helping clients nationwide. You can learn more at bestinterest.blog.
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blog/work. The link is in the show notes. And by night, I write the best interest blog and I host this podcast. I
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put out a weekly email newsletter. All of which help busy professionals and retirees avoid mistakes and grow their
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wealth by simplifying investing, taxes, and retirement planning. And some cool news, I'm now officially going to three
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episodes a month of the podcast. Three episodes a month. I asked you all via my weekly newsletter to fill out a poll.
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Uh, by the way, if you haven't subscribed to the newsletter, you can go join 4,000 subscribers all for free by
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signing up at bestinterest.blog. And the consensus of that poll was clear. More frequent episodes would be great, but
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the episode length cannot go any longer. So, I'm going to honor those wishes and
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send out three episodes a month, but not bombard you with super duper long episodes anymore. So, every month, my
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plan is to have one ask me anything AMA episode because you guys are giving me amazing feedback on those. I'm going to
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have one deep dive episode about a single uh specific topic and that's what we're doing today. And then I'll have
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one episode featuring an expert guest. So today's deep dive episode is going to
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be on the topic of special needs planning. So So here's my ask. Maybe special needs planning, you know,
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planning for a special needs child, having a special needs child, doesn't apply to you, doesn't apply to your
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family, but I would bet you know someone who it does apply to. And maybe, just maybe, this episode will introduce that
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person and that family to just one or two ideas that will make their burden lighter, that will help them make a
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smart financial or legal decision on behalf of their special needs child. It'll help them sleep at night a little
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bit better knowing that their child will be taken care of. So, my ask to you is to share this episode with that person
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in your life and see if it makes their life a little bit better. But before we start, we do have a review of the week
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from the Joel 11. Joel gives a five-st star review saying, "Explaining the complex situation." I love this podcast.
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Jesse explains the complex world of money in a way my kids can even understand. I highly recommend it. Joel,
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thank you for that kind review. You can shoot me an email to jesse@ bestinterest.blog and I'll get you
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hooked up with a supersoft podcast t-shirt. So, now on to special needs planning. I want to start the episode
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with a little story, a personal story. In September of this year, September of 2025, our daughter had what I would call
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her first serious sickness of her life. you know, definitely more than just a cold, more than just a day or two. She
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had a fever on or off for for 5 days. Really didn't get back up to full speed
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for seven or eight days. She was cranky and crying way more than normal during the days, seeking our comfort. She was
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definitely in pain from some of the the symptoms. And at only 15 months old, she
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couldn't really express to us exactly what was wrong, how we could make it better. She would cry on and off during
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her sleep during the night. And she's back to normal now, full strength. It's
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awesome. But truly, for the first time as a parent, this little part of my heart, you know, broke for her. Cuz
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here's this helpless baby through no fault of her own. She's in suffering.
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She's in pain. All she wants is to feel better, sleep through the nights, and
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live her normal baby life. And if I could, I would snap my fingers and give that to her. But I couldn't. All we
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could do was monitor her temperature, give her baby motin, try to read into her cries as best we could and give her
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what she wanted, and then wait and see if it it got better, see if she got better. is the type of week that made me
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so thankful when she did recover back to normal and my mind began to think about
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the many parents out there who have to deal with things on a regular basis far worse than just a week-long illness. So
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that's why today I want to focus on not only the emotional and human stakes, but
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also the financial stakes for when a child or another dependent has a disability or some sort of chronic
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illness because those circumstances require we plan not only for the parents lifetimes, which is maybe what we're
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mostly thinking about here as listeners, but we also have to think for our child's full lifetime, not just when
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they're in the household, not just the 529 college plan. We have to think of
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our child's lifetime long beyond that. Another quick story. I I appreciate that
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as my dad drove me to Rochester to drop me off for my freshman year of college at the U of Melora to any U of our
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listeners out there. We had a talk about this. You know, at the time that was going to be the first and biggest step
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towards me dropping off of the parental budget. Well, when someone has a child with a disability or a chronic disease,
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they might never be able to fall off the parental budget. But then there's so
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much more so much more meaningful stuff and and so many more anxietyinducing questions. you know, how will my child
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be cared for after I'm gone, after I die? How do I balance our personal needs
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today with tomorrow's needs and with the child's needs? So, that's why we're
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going to dive deep on the topic of financial planning and a little bit of life planning for parents of special
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needs children and and special needs adults. And we'll start with some life planning thoughts, then dive into the
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unique financial challenges that special needs families face. And then we'll get
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into some key planning tools like government benefits, special needs trusts, ABLE accounts, and insurance
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planning. We'll get into broader family financial ideas like retirement planning
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for the parents, sibling considerations and estate planning. And we'll end with
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some emotional and practical considerations and and some action steps. So, first let's just talk about
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the life aspect. Now, I'm not a special needs expert. I'm not a therapist, not a
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doctor, just a guy online who reads and listens to what other people have to say. So, I don't want to get into this
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lane too much because it's really not my lane. But here's what some smart people
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actually in that lane have to say. They say things like, "Raising a child with
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special needs doesn't mean managing appointments or insurance forms. It means building a sustainable life both
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for the children and for you as their parents." First, it's about building a
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support system. You can't do it alone. Parents who thrive on this journey, they
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learn to lean on other people, extended family, friends, mentors, especially other parents walking a similar path.
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Sometimes the most valuable support isn't advice, but someone who simply understands what the daily ups and downs
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are. We all know those aspects of our own lives where we meet someone on a similar path and we say, "Oh yeah, you
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get it, right? You can empathize with me. You get what I'm going through. We
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feel each other's journey." And being a special needs parent is a prime example
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of that. Second, communication matters even more than it normally matters. That's communication between spouses,
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between siblings, between parents and teachers and doctors and therapists. Everyone needs to be on the same page.
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Misunderstandings can cause a lot of frustration, but clear, proactive communication helps make life smoother
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again, both for the child and for the child's family. Third, we can think about routines and structure. Children
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in general, but especially children with special needs, often thrive when life is
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predictable. It doesn't necessarily have to mean rigid schedules, but it does
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mean creating rhythms that provide comfort and reduce stress. Structure can be a a safe foundation. You know,
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freeing up the rest of your time and energy and the rest of your children's time and energy for some sort of growth
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and learning and progress. Not to mention, as the parent, structure helps you get through your days and your weeks
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and months. The fourth thing to think about is care for the caregivers themselves. It might be the most
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overlooked aspect. In my reading online, this is where many parents feel a real internal struggle. They know how much
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they're sacrificing for the sake of their children. And it's a sacrifice
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that they want to make. Something they would do 100 out of 100 times, but it doesn't make it any easier. And
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everyone's well-being matters. And the burnout is real. You can't pour from an
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empty cup, as they say. So building in some sort of rest time, whether it's 5
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minutes of quiet in the morning or a full afternoon off, makes the entire family stronger. And then fifth, plan
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for the long term, not financially, but emotionally. Every parent of a special needs child wonders, "What will happen
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when I'm no longer here?" While financial planning is one part of that answer, and we'll spend most of today's
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episode on that part of the conversation, equally important is making sure your child has a community,
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a network of caring people, a road map of their preferences and routines, almost as if it's a guide book about
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your children for the future. Outside of the finances, outside of the legal questions, how will your child's life
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look when you're gone? And the last bit of advice on the life planning side is
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to celebrate the small wins. You know, life planning isn't just about mitigating challenges and reducing risk
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and then thinking about insurance and and estate planning. It's about noticing
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progress, you know, embracing the little things, the joy, acknowledging the resilience that your family builds every
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single day. And from the reading, it it seems like those moments, both big and small, are what carry families like this
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forward. But now, let's transition to some financial topics. Some unique financial challenges of special needs
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families. For most families, financial planning already feels like putting together a puzzle. In some cases, you
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have all the pieces and now it's just about putting those pieces together. In
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other cases, most of the pieces are missing or unknown. So, good luck solving that puzzle. You know, the first
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job is just assembling all the pieces themselves. And the pieces are, you know, retirement, kids college, a
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mortgage, healthcare, insurance, taxes, estate planning, minimizing debts, and actually loving life along the way,
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ideally. But now, imagine we add one more piece to that puzzle. Only this one doesn't really seem to fit well at all.
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It's more unpredictable. It somehow keeps on changing shape. And that's the
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reality for most families raising children with with special needs. It's not just that it's more expensive. It's
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just a fundamentally different financial landscape. So to talk about some of those unique challenges, the first one
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is higher ongoing costs. It's kind of the obvious one. It's more money out the
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door. Special needs families often face expenses far beyond what traditional financial planning assumes. therapies,
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specialized medical care, extra and and expensive prescriptions, adaptive equipment, individualized education
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programs, transportation, inhome care, full-time aids even. And those costs don't come with an end date often,
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right? For many parents, fully healthy and and kind of neurotypical children can you can budget around milestones.
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Daycare until age five, school, college for four years, maybe you're buying your
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kid a car at 16, something like that. Christmas gifts every year. I know that my children will eat more as teenagers
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and then they'll ask for more discretionary spending along the way. But the whole point is that we can
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budget for our kids based on their age, based on their stage in life. And we know at some point that budget probably
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has an end date. But for special needs parents, they don't really get clean budget horizons. The needs persist
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sometimes for decades, often far into adulthood. And even within categories like health care, the baseline is simply
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different. Many families worry about the occasional ER visit or or braces. But special needs families think about
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weekly therapy, annual surgeries, expensive medications not fully covered by insurance. So all of this creates a
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higher and more persistent drag on their cash flow. Not a one-time hurdle, but a
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marathon of higher ongoing costs. The second unique financial challenge is unpredictability, uncertainty. Most
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children grow and learn, gain independence in their late teens, early 20s. And again, we know by 18 my
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daughter will be in college and by 22 she'll be out and working. And it makes
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planning at least somewhat linear. But for a special needs child, you know, will they be able to live independently?
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Will they ever work? Will they always require daily care? Will their health improve and stabilize or will it
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deteriorate? And those unknowns force families to plan kind of on multiple timelines all at once. It's something we
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all need to do. Planning multiple timelines is something we all need to do because we don't know, say, how
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investment markets or tax codes might change in the future. But with a special needs family, imagine where, you know,
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one scenario where the child needs lifelong support, one where they achieve semi-independence, one where they end up
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thriving on their own. Those are very different scenarios, very different timelines. There's also unpredictability
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of public support. You know, will public government programs like Medicaid or SSI, supplementary security income,
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local educational resources, will they still exist in their current form in 20 years? No one really knows. Parents have
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to wonder how much of a safety net will be there when they're gone. And that
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uncertainty isn't just stressful. It actually changes the math, too. It leads
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families to save more than they otherwise would because undersshooting your goal has catastrophic consequences
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to your kids. And then there's the the parental balancing act, we'll call it.
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You know, parents know they can't afford to only think about their special needs
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child. They still have to think about themselves. They have to think about other kids if they have other kids. It's
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where some guilt enters the equation. How can I save for my own retirement when my child might need care forever?
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Is it fair to help our special needs child at the cost of burdening our other children with college debt? Right? Those
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are deeply emotional questions. And financially speaking, the challenge is prioritization. Every family faces
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trade-offs between retirement, college savings, present- day spending. But for special needs families, the stakes are
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if they neglect their retirement, they risk becoming financially dependent on their other children later in life. And
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that's a burden no parent wants to place. But if they short change their other kids, they risk resentment or
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family fractures down the road or they're just making life harder for their other kids than they want. So, you
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know, traditional advice says you you take care of your own oxygen mask first, right? That's kind of the the metaphor.
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And the most common example is that you should save for your own retirement before you help your children with
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college savings. But when you have a child who may never be financially independent, that advice feels certainly
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inadequate, if not even callous. you know, the balancing act for a special needs family. It's one of the most
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unique and and heart-wrenching challenges that those families face. The last layer here on these unique
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challenges is the layer of time. Caring for a special needs child isn't just a
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financial commitment. There's a serious time commitment and parents often have
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to reduce their hours at work to attend therapies or provide daily care. Career advancement opportunities are no longer
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there. They get missed. Business travel probably feels impossible. The time that
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other families might use to, I don't know, grind for a promotion, go on the extra family trip, start some sort of
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neighborhood side hustle, that time probably isn't available for a special needs family. In a dual inome household,
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one parent might be able to step back, leaving the family with only one steady paycheck. That changes everything about
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saving and investing in long-term financial planning. If a special needs family is a a dual income household,
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maybe one parent can step back, but that leaves the family with only one steady paycheck, which changes everything about
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saving, about investing, about long-term financial planning. And that time cost,
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if you will, that opportunity cost of of time, it's not really acknowledged in
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spreadsheets. It's hard to measure, but it's very real. Lost income potential,
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can be one of the largest financial hits that any special needs family face, I would I would wager. And unlike direct
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expenses where you can maybe cut or negotiate or get a tax rebate or or apply for insurance, time is very finite
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and it's very hard to get it back. Money is never just money, right? Money is
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it's not just about the money in in anyone situation, but particularly I think in these special needs situations.
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Money is security. Money is love. Money is peace of mind. Money is time. And that makes financial decisions feel
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heavier, more charged, maybe even paralyzing at time because the lack of money, right? It equates to the lack of
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security for your child, the lack of love for your child, the lack of peace of mind for your child. It's not just
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money. It's very, very emotional. So, what does this mean for financial planning? Well, it means traditional
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advice like, you know, save 15% of your income, invest in a 529, buy term life insurance, and invest the difference.
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That that advice might not fit for a special needs family. Instead, customized, flexible, long-term plans
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that account for their unique realities. That's what special needs families need.
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Here's a quick ad, and then we'll get back to the show. You probably know that
00:14:54
I love listener inspired content, but this is my first listener inspired advertisement. Frank asked me in short,
00:15:00
Jesse, is there a best time to start working with you as a client? And the short answer is yes. There are two ideal
00:15:05
times. One is at the beginning of a new year for probably some pretty obvious reasons, but the second one is right
00:15:10
about now, September and October. It's the perfect time for year-end tax planning to ensure you find the correct
00:15:16
balance of Roth conversions, tax gain or tax loss harvesting, making charitable gifts, spreading out any portfolio
00:15:22
changes over multiple tax years, or whatever other tax dials we can turn for you. Working backward from the December
00:15:28
31st tax deadline, the time to start those initial conversations is right now, August, September, maybe into early
00:15:35
October. You want to give yourself and us enough runway to make sure we get this right for you. So, if you're
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interested in starting a conversation with me and my colleagues, you can go to bestinterest.blog/work
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and fill out the form there. Again, that's on my blog on the work with Jesse
00:15:50
page. The address is bestinterest.blog/work and fill out the form. So, we're going
00:15:56
to dive deep right now into some of those realities, including special needs trusts, ABLE accounts, government
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benefit programs, and life insurance. Starting with special needs trusts, every special needs family needs to
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consider a special needs trust. Many government programs, two examples would be Medicaid and SSI, supplementary
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security income, which we'll talk about in a few minutes, they set strict limits
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on a beneficiary's assets and income. So, if your child directly inherits money or receives financial gifts in
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their name, those programs, Medicaid and SSI, and your child's eligibility for
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those programs, you know, Medicaid and SSI, and your child's eligibility for
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those programs could be jeopardized. So, that's where a special needs trust comes
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in. Instead of leaving assets directly to your child, you would leave your assets to the trust or other people in
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life would leave their assets to the trust. The trust then pays for your child's supplemental needs, therapies,
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travel, home modifications, educations, whatever it might be. But meanwhile, because the assets are not in your
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child's name, but instead in the trust's name, your child will remain eligible
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for government benefits. You can think of it as this uh financial Chinese wall firewall, right? Divider. The trust
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holds the resources, but it's structured so that they don't count against
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government eligibility. There are two main flavors of special needs trust, third party and first party. Third party
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special needs trust is funded by parents, grandparents, other people, usually set up through estate plans and
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very flexible and on the most common special needs trust. A first party special needs trust is funded with the
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child's own assets. maybe like an inheritance that the child received that was accidentally left directly to them
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or maybe a legal settlement from some sort of action that that the child was involved in. So, first party special
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needs trusts have more restrictions. They usually include a Medicaid payback provision if the beneficiary, if the
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special needs child were to die. Without any sort of special needs trust, some sort of well-meaning gift or inheritance
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might unintentionally knock your child off of their essential benefits. But with a trust, you keep those doors open.
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And as with all trusts, you name a trustee. Going back to previous episodes and blog posts about the basics of a
00:18:03
trust, every single trust out there has three important roles involved in it. So
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just a little background for your listeners, three important roles. The grtor who creates the trust, the
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beneficiary who benefits from the trust, and the trustee. And the trustee is the
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person who has a fiduciary obligation to act out the grtor's wishes for the trust. In some cases, the same person
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can play multiple roles, multiple of those three roles. But in the case of a special needs trust, it's hugely
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important that the a trusted trustee is in place to enact the grtor's wishes.
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Again, usually that would be like the parents wishes for the benefit of the beneficiary who would be the special
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needs child. One quick note, uh the trustee can be all the usual suspects, another family member, a close friend, a
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professional trustee like a bank or a trust company or law firm. But specifically for special needs trusts, a
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nonprofit poolled trust might be the right or the best answer. A a nonprofit poolled trustee. So this would be a a
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nonprofit that manages multiple special needs trusts, pooling assets for investment purposes, but keeping
00:19:05
separate accounts for each beneficiary. It usually results in lower costs than a
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professional trustee, but with a staff experienced specifically in disability related issues. They're often again
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because it's a nonprofit, they're often missiondriven, very familiar with the
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nuances of government programs. Now, the cons would be uh, you know, less flexibility in investment or
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distribution decisions, probably less personalization than a family member or a close friend would provide, but still
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a nonprofit pool trust is really worth looking into if you're not familiar with
00:19:34
it yet. And that's for a special needs trust. But moving on from special needs
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trust, uh we now have another key tool, the ABLE account, ABLE, which is short for achieving a better life experience,
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ABLE account. And it's a really nice kind of analogy in the financial planning world. We can think of ABLE
00:19:49
accounts as the direct cousins of 529 college savings plans. They allow families to set aside money up to
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$19,000 a year in 2025, plus potentially a work-related contribution into a tax advantage account for a child with
00:20:03
disabilities. the money grows inside that account taxfree and as long as the withdrawals are used for a qualified
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disability expense which is you know a broad category that includes housing, education, healthcare, transportation,
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well as long as it's used for one of those qualified expenses then the money
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comes out taxfree too. So again very similar to the way a 529 works and another big win is that ABLE accounts
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don't count against SSI or Medicaid eligibility. You can save up to $100,000
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currently inside an ABLE account without jeopardizing eligibility for SSI. And starting in 2025, funds from a qualified
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529 college savings plan can be permanently rolled over into an ABLE account. So this would come up in a
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situation where maybe you have multiple children, one of the kids has special needs. Your kids who do end up going to
00:20:50
college, they end up with extra money in the 529. You can roll the money over into an ABLE account. It also might come
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up in a situation where a child who you have been saving for a 529 for at some point in their childhood they become
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disabled or permanently disabled in some way. They probably are not going to go to college in the future, but now they
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could really use that money in an ABLE account. You can permanently roll money from a 529 into an ABLE account. There
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are some caveats or things to know, some nuances about ABLE accounts. To qualify
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for having an ABLED account, the disability, your child's disability must have been diagnosed before age 26,
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although I believe that's soon expanding now to 46 thanks to new legislation. So,
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that would be a big shift. And unlike a third party trust, an ABLE account is subject to a a Medicaid payback when the
00:21:38
beneficiary if and when the beneficiary passes away. But in the right circumstances, ABLE accounts provide
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flexibility. They provide some control, and they definitely provide tax efficiency. They're very handy for
00:21:48
day-to-day expenses of of a special needs child, whereas a trust might be more geared towards kind of larger
00:21:54
long-term support. Next, let's dive into the many government benefits programs.
00:21:58
Special needs families, unfortunately, need to learn a bit of an alphabet soup. There's SSI, there's SSDI, Medicaid,
00:22:04
Medicare, SNAP, and and some more. And each program has its quirks, but broadly SSI, supplemental security income,
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provides a uh a monthly income for individuals with limited means who are disabled, blind, or elderly. Uh for many
00:22:18
special needs children transitioning into adulthood, SSI becomes their core, their main income stream. SSDI,
00:22:26
Social Security disability insurance, is different. It's tied to work history,
00:22:30
but disabled adult children can sometimes qualify based on their parents' work record. That's important.
00:22:35
It's a good wrinkle, an important wrinkle to plan for. Medicaid and Medicare. In case I've never said this
00:22:41
before, maybe you've never heard this before. In case you confuse Medicaid and
00:22:45
Medicare, Medicaid rhymes with paid because it's means-based. It's based on
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money. Well, Medicare rhymes with hair, as in it's meant for people with no hair
00:22:55
or white hair. It's for people who are 65 plus. Medicaid rhymes with paid. Medicare rhymes with hair. A little
00:23:01
pneummonic that might help you out. Medicaid often provides health care coverage and critically long-term
00:23:07
support services for special needs families. It often includes inhome care, day programs, community support, some
00:23:13
things that private insurance might not cover, rarely covers. In fact, Medicare does eventually enter a picture if a
00:23:20
child qualifies through SSDI. So, that's important. It can also apply after they
00:23:25
reach age 65, but sometimes Medicare can enter the picture if the child qualifies
00:23:29
through SSDI. And then SNAP, I mentioned that before. Other programs in general,
00:23:34
SNAP is for food assistance, but there are state level services, maybe even county and city level services, other
00:23:39
programs. We'll get into a little bit of that later. The planning challenge isn't
00:23:43
just knowing that these programs exist. A big part of it is just structuring the
00:23:46
family's finances so that their eligibility is protected while still providing for a good quality of life. So
00:23:52
that's why trusts, able accounts, careful gifting strategies do matter so much and and matter even more for a
00:23:58
special needs family. Let's talk about life insurance. And really, life insurance is for many parents, life
00:24:03
insurance is a safety net. You know, if I die, my family can stay afloat. But for special needs families, it's much
00:24:08
more than that. It's often a funding mechanism for their child's lifelong
00:24:12
care. To be more specific here, so I'll use my family as example. For my family,
00:24:17
our term life insurance policies are essentially designed to decay down to zero benefit as my children graduate
00:24:24
college and proceed on with their own adult lives. It's like it's not perfect,
00:24:27
but that's the general idea is that there will come a time in the future, 20, 25 years from now, depending on how
00:24:33
many kids we have, where we won't have any more life insurance because our kids
00:24:37
will be gone. They'll be out of the nest. They'll be on their own. And the
00:24:40
question of if I die, will my family be screwed by that time, 20 or 25 years from now, I'm hoping the answer is no.
00:24:47
If I die, my family will still be okay. In the interim, though, it's really nice
00:24:51
to have term life insurance. But for a special needs parent, their life insurance might stay in force forever.
00:24:57
If your child might never be financially independent, then your estate plan needs
00:25:01
some sort of pool of assets specifically earmarked for their support. And since few parents have millions of dollars
00:25:07
sitting around, life insurance can be something that fills that gap. A key though is matching the insurance to the
00:25:14
overall financial plan. So this is a place where some sort of permanent life insurance policy, you know, whole life
00:25:20
policy ensures that coverage doesn't expire at age 70 or age 80. This is a case where term life insurance may
00:25:27
simply be too temporary. The policy's death benefit should flow into a special
00:25:31
needs trust. Usually, I mean, consult a lawyer to be sure or a CFP, but usually that's how it you want it to work. The
00:25:38
death benefit does not flow directly to the child. So this again avoids any sort
00:25:42
of benefits eligibility issues that we talked about earlier. Parents should periodically revisit the amount of
00:25:47
coverage as their costs and their circumstances change. And now life insurance in this context, it's not just
00:25:53
leaving a windfall. It's ensuring continuity of care. Permanent life policies, as we've talked about here on
00:25:58
the podcast many times before, they usually stink. They're usually not that great. But they are important here for
00:26:04
special needs situations. They really are. So, how do we reconcile those two facts? the facts that for most of us a
00:26:11
whole life a universal life a permanent life insurance policy is not something we want and yet in this case they're
00:26:17
very special and and important. So let's start with the critique because it's
00:26:21
valid. Permanent life insurance comes with high costs, much higher costs, much higher premiums than term life
00:26:26
insurance. It comes with complexity. Permanent life insurance are often much more hard to understand. The cash value
00:26:32
component is often oversold. Permanent life insurance policies usually come with underperformance as an investment.
00:26:37
If you're thinking of it as an investment, if it's sold to you as an investment, they typically lag behind
00:26:42
simple lowcost index funds. And permanent life policies are usually salesdriven. Too often, permanent life
00:26:47
gets it gets pushed because of the commissions, the high commissions, not because it's the right tool for the
00:26:53
client, for the customer. And that's why for most families, the math is so clear.
00:26:56
Simply buy an inexpensive term coverage, not permanent, but a term coverage policy to protect against early death
00:27:03
and then invest the difference in premiums elsewhere. But for special needs families, things are different.
00:27:08
Families raising a child with lifelong support, they have a planning problem that by term and invest the difference
00:27:13
simply doesn't solve their planning problem. The permanent life policy provides certainty. You know that no
00:27:19
matter what, there will be a benefit for the special needs trust. That's hard to
00:27:23
replicate with investments alone given market volatility and longevity risks. So permanent life is usually a poor
00:27:29
choice as an investment, but in special needs planning, it is not an investment.
00:27:33
It's a funding mechanism for the special needs trust. It's not about cash value
00:27:37
growth. It's not about beating the market. It's about creating a guarantee,
00:27:41
a guaranteed pool of assets at the precise moment when the parents are no longer there to provide for their child.
00:27:47
For most people, permanent life insurance is a hammer that's looking for a nail. And we don't want to be that
00:27:52
nail. But for special needs families, they are that perfect nail. And permanent life insurance is the perfect
00:27:58
tool that matches up for the job. Of course, just because it's a useful tool
00:28:02
doesn't mean that all permanent policies are created equal. Families in this
00:28:06
circumstance should still shop very carefully, work with a a fiduciary-minded planner, not a
00:28:11
commissioned salesperson with a quota. They should keep it simple. Often a uh a straightforward whole life policy with a
00:28:17
right death benefit is better than a complex universal policy with all the bells and whistles. The insurance policy
00:28:23
should integrate with the trust. The policy's beneficiary should be the special needs trust, not the child
00:28:27
directly. And then we want to rightsize the coverage. You know, we don't need $5
00:28:32
million of coverage if $1 million is realistically going to meet the child's
00:28:37
needs. The next topic I want to talk about is guardianship and legal planning. Money is only part of the
00:28:42
equation in today's conversation. We actually need to ask about who will care
00:28:45
for your child when you're gone. And that's where guardianship or conservatorship or powers of attorney
00:28:51
come in. Parents need to decide who will make medical, legal, and financial decisions for their child if the child
00:28:57
can't make those decisions independently. And it's not just a legal hoop. It's really about peace of mind.
00:29:02
Knowing that someone trustworthy will advocate for your child in hospitals, in schools, in courtrooms. That legal
00:29:07
planning can also cover letters of intent. These are non-binding documents that capture a parent's wishes, capture
00:29:13
maybe a parent's insights about the child. Again, it's not a legal document,
00:29:17
but you can think of it as a manual for future caregivers that are full of details that probably wouldn't go into
00:29:23
legal form anyway. And so, one important question, we've painted some pictures
00:29:26
here today where a guardian or a power of attorney or a trustee or other similar roles are involved. And the
00:29:32
logical question might be, should one single person fill all of these roles to make life simpler or are there negative
00:29:40
consequences for doing that? Some of the pros for having one person handle everything. We have simplicity, right?
00:29:45
We have one decision maker. We have fewer cooks in the kitchen. We have consistency. The same values and
00:29:51
judgment guide both financial and personal decisions. And then we have efficiency. There's less risk of a
00:29:56
dispute between different parties because the guardian says X, but the trustee of a special needs trust says Y.
00:30:03
But then there are certainly cons of having one person handle everything. First might just be the overload. It's a
00:30:09
really big responsibility. caregiving, financial management, legal decisions. It's understandable how it could burn
00:30:14
someone out. Possibly a bigger one than that is skill mismatch. There's no correlation between someone being an
00:30:20
excellent caregiver and being an excellent money manager and vice versa. So, I think it's important to have the
00:30:26
right people in the right roles with the right skills. And then last is just some
00:30:30
sort of system of checks and balances. Putting too much power, for lack of a better term, in one person increases the
00:30:35
risk of mistakes, of mismanagement in some unfortunate but rare cases, but still real cases, some some cases of
00:30:42
abuse. And my opinion from some professional experience, but more so from speaking with and reading with
00:30:47
other expert opinions, is to not overload one person. Guardianship and caregiving should usually be separate
00:30:55
from financial and trust management. a mix of personal connection and professional oversight tends to work
00:31:01
best. So, I'm in favor of getting uh different people for different roles, you know, after your death for different
00:31:09
caregiving, guardianship, powers of attorney, and trustee like roles. It's important to get different people
00:31:14
involved so that we get the right skills involved, we have the right checks and balances so that no one person becomes
00:31:20
completely overloaded. Next, we can talk about some of the financial planning fundamentals. the fundamentals that
00:31:26
everyone needs to think about, but we can talk about how these fundamentals change for special needs families
00:31:31
because it is it's easy to focus and important to focus on the special tools
00:31:34
like special needs trusts and ABLE accounts, government programs, but forget that special needs families also
00:31:40
need to do all of the basics, but that those basics look different for them. For example, emergency funds should
00:31:46
probably be bigger than average because unexpected expenses are more common. Retirement planning is still very
00:31:52
important. It's just simply harder. Parents need to protect their own financial futures, but they have a lot
00:31:56
less discretionary income to save for the long run. Estate planning, as we've
00:32:00
already talked about, you know, wills and beneficiary designations and titling of accounts needs to be done really
00:32:06
carefully to avoid accidentally leaving assets directly to the child. Something that's probably a boilerplate simple
00:32:12
task for most families, like naming a beneficiary, might become a we should talk to a professional to make sure we
00:32:18
don't screw this up for a special needs family. And then there's just simply
00:32:21
that guardianship, power of attorney, trustee aspect to estate planning that we just talked about. Tax planning is a
00:32:28
little different, too. It usually involves a lot of medical expense deductions, dependent care credits, the
00:32:34
interplay of trusts and ABLE distributions with family taxes. So, in other words, it's it's really not just
00:32:40
about all the unique tools that special needs families have at their disposal or
00:32:44
need to be aware of. It's also about weaving those tools into the rest of their quote unquote normal financial
00:32:50
foundation, which actually isn't that normal at all. Here's a quick ad and
00:32:55
then we'll get back to the show. Serious question. Why do podcasters constantly
00:33:00
ask for ratings and reviews? Yes, they do help highlight our shows to new listeners. They help strangers find us
00:33:06
on Apple Podcast and Spotify. It's totally true and a good reason to ask for ratings and reviews. But I have
00:33:12
something more important, at least more important to me. I want to know if you like this stuff. I want to know if you
00:33:18
like my podcast episodes, my monologues, my guests, the information I share with
00:33:22
you and the stories I tell. I want to improve and make your listening more enjoyable in the process. So yeah, I
00:33:28
would love to read your reviews. And sure, if you throw a rating in there, too, that's great. If you like what I'm
00:33:34
doing, please share it with me. It's such a great feeling to read your feedback. I'd love to read your review
00:33:40
or see a rating on Apple Podcast or Spotify. Thank you. Let's talk about some community and professional
00:33:46
resources. You know, special needs planning is complex and and few families should can do it alone. And thankfully,
00:33:53
there is. There's a web of resources available. Some we've already talked
00:33:56
about, some we haven't yet. And that web of resources goes from federal level
00:34:00
Washington DC down to your county clerk's office. On the federal level, we've already talked about the big
00:34:06
three. SSI, supplemental security income. For many families, that is the foundation. That's the monthly cash
00:34:11
payments to children and adults with disabilities who do have to meet strict financial and medical eligibility
00:34:17
standards. And that's again those standards, that eligibility, that's why
00:34:21
the special needs trusts and titling of accounts is so important. The dollar amounts for SSI aren't necessarily
00:34:28
life-changing, but SSI eligibility usually opens doors to other benefits, including Medicaid in most states. So
00:34:36
that's why it's like SSI, getting SSI is is kind of that first step. Again, even
00:34:40
though the money itself might not be life-changing, it's an open door to applying to other benefits. Medicaid, as
00:34:46
I just mentioned, Medicaid is the primary health care safety net for people with disabilities. Beyond doctor
00:34:52
visits and hospital coverage, it pays for long-term supports like inhome care and therapies and specialized equipment.
00:34:58
In most states, SSI eligibility automatically triggers Medicaid. And then we already talked about SSDI,
00:35:04
Social Security disability insurance program tied to work history. Adults with disabilities though sometimes could
00:35:10
qualify through a parents record once the parent retires or passes away. An SSDI also brings access to Medicare
00:35:17
after a waiting period which can be an important supplement to Medicaid. So those are the big three on the federal
00:35:23
level. SSI, SSDI, and Medicaid. Together those programs are the the backbone you
00:35:29
can say of federal support. But what about on the state level? On the state level, we have uh waiverss and services.
00:35:35
Every state layers its own programs on top of the federal framework. They often come through Medicaid waivers, sometimes
00:35:42
called home and community based services, HCBS, home and community based services. Waivers fund services that
00:35:49
allow individuals with disabilities to live at home or in the community rather than in institutions. This might include
00:35:55
respit care for parents, home modifications, job training, and supported living arrangements. I will
00:36:01
say that the details seem to vary widely and wildly by state. So eligibility and
00:36:06
weight lists and the actual services that are offered can look very different, but almost every state has
00:36:11
some version of these programs and they are actually often the most impactful benefits available. And then we can
00:36:18
drill down even further to the county, the local, sometimes regional agencies that provide hands-on services that
00:36:24
might include early intervention programs for young children, often coordinated through local school
00:36:28
districts. I mean, a very simple one, uh, I don't even know technically actually if this falls under the
00:36:33
disability framework, but like our daughter is excellent in communicating in every single way except for actually
00:36:40
forming syllables and words. Right now, she's only 15 months, 16 months old,
00:36:44
right? But she can point, she can she tells you exactly what kind of food she wants, but she's just not using her
00:36:49
words. Not that all 16-month-olds have left words, but either way, through our county, we were able to take her to a
00:36:56
speech pathologist just to make sure that there wasn't any sort of deeper problem. And there wasn't, thankfully.
00:37:01
But like that's an early intervention program. That's pretty important to
00:37:04
have. Also on the county level, we have developmental disability boards which connect families to case managers and
00:37:10
other resources. transportation services for individuals who can't drive, respbit
00:37:14
programs that give parents and caregivers a much needed break. And then on top of, you know, government county
00:37:19
resources, there are local nonprofits and advocacy groups and faith communities that often play a big role.
00:37:25
Think of things like United Way or Autism Speaks or the National Down Syndrome Society. You know, a little
00:37:31
aside here in Rochester, I'm a member of the Rochester Rotary Group and our our
00:37:35
flagship service mission is to operate and fund a place called Sunshine Camp just south of Rochester. It's a fully
00:37:41
accessible 150 acre residential summer camp dedicated though to children and young adults. I think the older kids
00:37:48
tend to be college age with physical or developmental disabilities. It offers them an inclusive summer camp experience
00:37:56
one week at a time. It has no barrier to participation. The children attend for free thanks to community support, thanks
00:38:02
to Rotarian support. And one of the more touching things that I remember hearing
00:38:06
when I first learned about Sunshine Camp, it was a parent of one of the kids who said, "I know my child's having the
00:38:12
time of their life with other kids just like them. And as much as I love caring for my child, I get to have a week off,
00:38:18
too." And I think that's a perfect example of a nonprofit with a dedicated
00:38:22
mission helping special needs families. And those types of resources are hopefully available in your region, too,
00:38:28
wherever you are. Those groups help families navigate the maze and and provide grants for equipment. simply
00:38:33
creating a community for parents who need support. I've heard a lot of good feedback too from special needs families
00:38:38
just about the role of different professionals in their lives, right? Special needs attorneys, CFPs, social
00:38:43
workers, healthcare advocates to translate the jargon, to coordinate applications, to ensure that benefits
00:38:49
are structured properly. They might be mostly minor interactions, but they're
00:38:54
important interactions nonetheless. And if we pull that all together, you know, and kind of wrap up this episode,
00:38:59
special needs planning is not just about finding one magic solution, but instead
00:39:03
it's about these these many different layers of support as we've talked about.
00:39:07
You know, trusts for long-term financial protection, ABLE accounts for flexible spending, government benefits truly as
00:39:13
the backbone of your resources. life insurance as a funding source for a trust, guardianship and legal planning
00:39:19
for decision-making, fundamentals, making sure that the family has its own fundamentals taken care of, too. Your
00:39:24
retirement as parents, your tax planning, your estate work, and then some community and professional support
00:39:29
to tie it all together. When combined, they create a framework that lets parents of special needs families
00:39:35
breathe just a little bit easier. >> Thanks for tuning in to this episode of
00:39:39
Personal Finance for Long-Term Investors. If you have a question for Jesse to answer on a future episode,
00:39:45
send him an email over at his blog, The Bestinest. His email address is [email protected].
00:39:52
Again, that's jessevestinterest.blog. Did you enjoy the show? Subscribe, rate,
00:39:58
and review the podcast wherever you listen. This helps others find the show and invest in knowledge themselves. And
00:40:04
we really appreciate it. We'll catch you on the next episode of Personal Finance
00:40:08
for Long-Term Investors. Personal Finance for Long-Term Investors is a personal podcast meant for education and
00:40:15
entertainment. It should not be taken as financial advice and it's not prescriptive of your financial
00:40:20
situation.