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Financial Resources for the Care of Those with Special Needs

May 16, 2022

Understanding the Options Available to Caretakers

Thanks to advances in modern medicine people are living longer, including individuals with special needs. Although this is good news, it does add concern as to how certain people will be cared for when their caretakers no longer can. Government entities may provide essentials like food, shelter, medical care, and education. However, most of us want more for our loved ones. Sound planning is indispensable to ensuring that a certain level of care and quality of life continues for these individuals.

Government Assistance Versus Supplemental Resources

Costs of medical care and other necessities for individuals with special needs can be astronomical which is why government safety nets are set in place. Public-assistance programs (e.g., Medicare, Medicaid, Social Security Disability Income, state and local benefits) normally provide the basics. Money for supplemental items like transportation, vacations, recreation, computers, education materials and others need to come from somewhere else. Since much of what is provided by government is “needs-based,” one should be judicious when providing financial security to an individual with special needs. Laws on who qualifies for what differ from state to state. Regulations are often confusing and even a bit tricky. Assets owned or entitled to by an individual with special needs may disqualify him/her from government benefits. In addition, tax rules concerning this area can be exceedingly complex. A wrong decision could be very costly, no matter how well intended.  

Options for Providing Financial Security

Everyone’s situation is different. Caretakers have choices in deciding what approach best fits their circumstances and the future of the individual with special needs. Having a general understanding of each option will go a long way:

  • Making an outright gift—good if the parent’s estate is small and the individual can manage their affairs, but the transfer of assets could jeopardize government benefits
  • Disinheriting the individual—an option to consider if resources are small and the special needs individual’s needs are great, but there may be no supplemental support
  • Making gifts to third parties—simple to fund and administer, but lack of structure can cause a well-meaning approach to go awry. The third party may determine that the sums provided are inadequate, plus there is no guarantee that said person will follow through in the manner anticipated. Critical issues can arise if the third party dies before the individual does. 
  • Creating a special-needs trust—a structured plan ensures economic well-being without interference to government benefits for the individual’s entire lifetime. Although this is likely the best course of action if the resources are available, there are administrative costs to consider.

Speak to a Financial Advisor or Attorney

Providing the financial resources to an individual with special needs is a complicated subject and no caretaker should be expected to know all the rules and regulations. A good first step is to become aware of the options available so that any future discussion is productive. The second step should be to contact a professional(s) who is well-versed in such matters. A meeting could be set up seeking guidance on establishing a special-needs trust or receiving consultation on another approach. Strategizing with an expert will result in the best plan for both caretaker and individual.  





Registered Representative, Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative. Cambridge Investment Research Advisors Inc., a Registered Investment Advisor. New South Wealth Management and Cambridge are not affiliated.