More often than not, Wrubel’s first suggestion is that his client set up a special needs trust for their special needs child.
“A person can’t qualify for SSI (Supplemental Security Income) if they have more than $2,000 in accountable resources —anything that’s for investment purposes,” he said. “Most families that come to talk to me have retirement accounts, etc., so a special needs trust allows me to put accountable resources towards [their special needs child].”
Wrubel said that parents of special needs children also tend to have emergency funds larger than those of families without a special needs child in order to afford the cost of medical services and equipment, education, diet and clothing.
“I recommend an emergency fund of about six months of salary, if they can get there,” he said. “I also like for people to have term life insurance in place.”
Wrubel said he recommends a third component to building a financial plan for families of special needs kids—an ABLE account.
ABLE accounts are tax-advantaged savings accounts for individuals with disabilities and their families. They were created under the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014, better known as the ABLE Act.
The beneficiary of the ABLE account is the account owner, and income earned by the account will not be taxed. The account beneficiary, family, friends, Special Needs Trust or Pooled Trust can all make contributions to the ABLE account, but each contribution must be made using post-tax dollars and will not be tax deductible for purposes of federal taxes. However, some states may allow for state income tax deductions for contributions made to an ABLE account.
Wrubel said that an ABLE account is not always a perfect solution to financing the care of a special needs child.
“Once ABLE has $100,000 in it, the client will lose their SSI, but not their Medicaid,” he said.
Wrubel said it is just as important for families of special needs children to put aside money for their own retirement account as it is for them to save for their special needs child.