For parents and guardians of children with disabilities, financial planning is an essential part of their care. While every family is different, here are some steps to consider as you put a plan in place that provides your child with access to resources and support during your lifetime and beyond.
Financial Steps to Consider for Families of Children with Disabilities
Early planning can help ensure your child gets access to the resources they need.
Establish a Special Needs Trust and Choose a Trustee
Well-meaning friends and relatives may wish to contribute to your child’s care, but it’s important to know that if he or she accumulates too many assets, it may jeopardize eligibility for certain benefits. For example, Medicaid and Social Security cover the cost of basic health care for Americans who have less than $2,000 in assets ($3,000 for a couple) .1
If your child is set to receive an inheritance or life insurance payment, you can keep their assets below this cap by setting up a special needs trust and naming it, rather than your child, as the beneficiary. Assets in a special needs trust do not count against your child’s eligibility for public assistance benefits.
You may act as the trustee during your lifetime and designate another trustworthy individual to fulfill that responsibility when you are no longer able.
Set Up an ABLE Account
Similar to 529 education savings accounts, ABLE (Achieving a Better Life Experience) accounts provide a tax-advantaged way to invest towards the cost of care for an individual with a qualifying disability (“Eligible Individual”). While contributions to an ABLE account are not eligible for a federal income tax deduction, the earnings within an ABLE account potentially grow on a tax deferred basis. Distributions of earnings are not taxed if the money is used for the Eligible Individual’s qualified disability expenses, including "education, housing, transportation, assistive technology, employment training and support, financial management and health care."
For 2025, contributors can contribute in the aggregate up to $19,000 to an Eligible Individual’s ABLE account annually. Plus, certain Eligible Individual who owns an ABLE account may be able to make an additional contribution of an amount up to the lesser of (a) the Eligible Individual’s compensation from employment for the tax year or (b)the federal poverty line for a one-person household for the previous year based on the legal residence of the Eligible Individual. Assets in an ABLE account generally do not affect eligibility for Social Security benefits, unless the ABLE account balance exceeds $100,000.
Designate a Guardian
While it might be tough to imagine a day when you are no longer your child’s guardian, appointing someone to step into that role should you pass away, or otherwise become unable to manage the responsibility, can provide an important layer of protection. This is, of course, a major decision, and you should ensure that the person you choose is fully informed about your child’s unique circumstances and ready to take on everything the role entails.
Draft a Will
Most people need a will, but it becomes an even higher priority if you have a family member with disabilities. Anything can happen at any time, and a will documents your final wishes and outlines how your assets will be distributed after you pass away. An estate attorney has the specialized skills to help you draft one.
The Bottom Line
Making decisions to ensure your child has a financially secure future can be an intimidating task. Fortunately, you don’t have to navigate it alone. A Financial Advisor who specializes in special needs planning can offer guidance and suggestions on how to meet your goals.
1 Social Security Administration, Information about tax-free saving accounts for disabled individuals(opens in a new tab), Accessed January 3, 2025
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The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investors should consider many factors before deciding which 529A program is appropriate. Some of these factors include: the 529A program’s investment options and the historical investment performance of these options, the program’s flexibility and features, the reputation and expertise of the program's investment manager, the program’s contribution limits and the federal and state tax benefits associated with an investment in the program. Some states, for example, may offer favorable tax treatment and other benefits to their residents only if they invest in the state’s own 529A Qualified ABLE Program. Investors should determine their home state’s tax treatment of 529A programs when considering whether to choose an in-state or out-of-state plan. Investors should consult with their tax or legal advisor before investing in any 529A program or contact their state tax division for more information.
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