5 Financial Considerations for Parents of Children with Special Needs

by Hank Coleman

Financial Considerations for Parents of Special Needs ChildrenHaving kids is one of the biggest financial decisions you’ll ever make (not to mention emotionally fulfilling, of course), especially if you are the parents of special needs children that requires additional medical care, in-home assistance, and rehabilitative therapies. If your child was recently diagnosed with a mental or physical disability, or you’re currently struggling with your finances as parents of special needs children, there are many things to consider, both short-term and long-term.

A great place to start would be the Parent Advocacy Coalition for Educational Rights (PACER), because their Possibilities publication is a tremendously useful financial resource for parents of special needs children and have disabilities.

Financial Considerations for Parents of Children with Special Needs

Life Insurance

Life insurance is extremely important for parents, especially if there is a disabled child living at home. The trick is deciding how much life insurance you need, based on your annual income, your current (and projected) expenses, and other debts you currently have.

Many people feel uncomfortable when it comes to life insurance because it makes you think about what will happen to your family after your death, but putting off buying life insurance is not the route you want to take here. Instead, getting life insurance while you’re still pretty young will help you save money and ensure that your family is protected even in worst-case scenarios.

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Reducing Health Care Expenses

In addition to tax breaks for medical and home aide expenses (more on this below), there are a many health coverage options for children with special needs. If you haven’t already, you can also apply for Social Security Disability Insurance to receive governmental assistance for your child’s medical expenses and ensure they have an income available even when you’re not around.

To save money on your own health care, you may opt for a health savings account to protect your own well-being and supplement any employer-provided health care plan you’re on.

Saving for Retirement and Long-Term Care

Financial Considerations for Parents of Special Needs ChildrenIf you feel overwhelmed just by the idea of saving for retirement, not to mention saving for your child’s future, you’re not alone. Fortunately, there are several resources available to help you manage both savings plans and stay on track. For instance, the South Carolina Partnership of Disability Organizations has

For instance, the South Carolina Partnership of Disability Organizations has an excellent PDF guide on preparing and saving for long-term care for disabled dependents. They point out that many families avoid planning for different reasons – thinking the child is still too young, worrying about whether they can afford the attorney fees, feeling emotionally exhausted by the process.

But, it’s important to get started right away to save as much money as possible for both your own retirement and your child’s long-term care expenses.

Even if you’re in the midst of paying off debt, you can still save for retirement as well. Or, perhaps you’re living paycheck to paycheck and can’t fathom how you’ll save for long-term goals like retirement and care for your child. Again, it’s definitely possible, it just requires some careful planning up front and an eye for areas in your budget where you can cut expenses to funnel the savings to your long-term goals.

Special Needs Trust

The PACER Center and the National Endowment for Financial Education teamed up to help families with informative resources, including an extensive guide on setting up a special needs trust to protect your child for years to come. It’s important to remember that your child might become ineligible for government benefits if they receive more than $2,000 in assets, so careful financial planning is in order to avoid any mishaps.

The PACER Center lists several ways you can fund the special needs trust for your child, including life insurance, government benefits, gifts and inheritances, military benefits, and property. You’ll need to hire an attorney to assist you with setting up the special needs trust, as well as appointing a trustee – a person or financial institution – to ensure the money is managed appropriately. Once it’s established, the trust can be used to pay for health care, rehabilitation therapies, educational expenses, home aides, and transportation.

Tax Breaks for Caretakers of Children with Disabilities

There are a few tax credits for caretakers available, such as the Child and Dependent Care Credit, Child Tax Credit, and Earned Income Tax Credit. There are also medical and dental expenses you might be able to deduct on your taxes, particularly when it comes to home modifications like wheelchair ramps or disability-friendly bathroom alterations.

The IRS has a number of tax deductions available for caretakers of disabled dependents, so consult an accountant to ensure you’re able to maximize your savings for the benefit of your family. 

There are many safeguards in place to help parents care for their special needs’ children, but these avenues take time, careful research and planning to achieve the best outcomes. If you haven’t fully planned for both your future and your child’s future, there’s no better time than now to start planning and saving.

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 593 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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