Raising a child with disabilities comes with unique financial challenges, from medical expenses and therapy costs to long-term care and education planning. Parents must navigate government benefits, savings strategies, and legal protections to ensure their child’s financial future is secure.
This guide outlines essential financial planning tips for parents of children with disabilities, including how to maximize government benefits, set up special accounts, and prepare for long-term financial stability.
1. Understand and Maximize Government Benefits
Government programs provide crucial financial support for children with disabilities. Understanding eligibility and benefits can help reduce out-of-pocket expenses.
A. Supplemental Security Income (SSI)
✅ SSI provides monthly financial assistance to children with disabilities from low-income families.
✅ Eligibility depends on parental income and assets until the child turns 18.
✅ After 18, only the child’s income and assets are considered, which may increase eligibility.
📌 Tip: Apply for SSI early and report changes in income to avoid overpayments.
B. Medicaid & Medicaid Waivers
✅ Medicaid covers essential medical services, including therapy, home healthcare, and assistive devices.
✅ Many states offer Medicaid waivers that provide additional support for in-home care and community services.
📌 Tip: Even if your child does not qualify for SSI, they may still be eligible for Medicaid waivers to help cover healthcare costs.
C. Social Security Disability Insurance (SSDI) & Disabled Adult Child (DAC) Benefits
✅ If a parent retires, becomes disabled, or passes away, their child with a disability may qualify for SSDI or DAC benefits.
✅ DAC benefits do not affect SSI eligibility as long as the recipient remains unmarried and meets SSA’s disability criteria.
📌 Tip: Ensure your child’s disability is documented before age 22 to qualify for DAC benefits.
2. Open an ABLE Account to Save Without Affecting Benefits
An ABLE account (Achieving a Better Life Experience) allows individuals with disabilities to save money tax-free while protecting SSI and Medicaid eligibility.
✅ Up to $19,000 per year (2025 limit) can be contributed without affecting SSI.
✅ Funds can be used for education, healthcare, housing, and daily living expenses.
✅ Balances up to $100,000 do not count against SSI’s $2,000 asset limit.
📌 Tip: An ABLE account is a great way to set aside funds for future expenses without impacting benefits.
3. Set Up a Special Needs Trust (SNT) for Long-Term Security
A Special Needs Trust (SNT) protects assets for a child with disabilities while maintaining eligibility for government benefits.
✅ Types of SNTs:
Third-Party SNT: Created by parents or relatives to provide financial support.
First-Party SNT: Funded with the child’s own assets (e.g., inheritance, legal settlement).
Pooled SNT: Managed by a nonprofit organization, ideal for lower-cost trust management.
✅ Why It’s Important:
Prevents disqualification from SSI & Medicaid due to excess assets.
Ensures financial security beyond parental support.
Funds can cover medical care, therapy, education, and personal expenses.
📌 Tip: Work with a special needs planning attorney to establish an SNT that meets your child’s needs.
4. Plan for Long-Term Care and Guardianship
Parents should prepare for the time when they may no longer be able to care for their child.
A. Establish a Guardianship or Power of Attorney
✅ When a child with disabilities turns 18, parents may need to seek legal guardianship or power of attorney to make financial and healthcare decisions on their behalf.
✅ Alternatives to full guardianship include Supported Decision-Making Agreements, which allow the individual to maintain some independence.
📌 Tip: Consider a letter of intent outlining your child’s medical history, preferences, and routines to guide future caregivers.
B. Life Insurance & Estate Planning
✅ A life insurance policy can provide financial security if parents pass away.
✅ Name a Special Needs Trust as the beneficiary instead of your child to prevent disqualification from government benefits.
📌 Tip: Consult a financial planner with experience in special needs planning to structure life insurance and estate planning effectively.
5. Budgeting and Managing Everyday Expenses
Balancing medical bills, therapy costs, and daily expenses requires careful budgeting.
✅ Track expenses related to disability care (therapy, medications, equipment, etc.).
✅ Seek disability-related tax credits, such as the Child and Dependent Care Credit and Medical Expense Deductions.
✅ Use discount programs and nonprofit resources to lower costs on medical care and adaptive equipment.
📌 Tip: Use Purple’s financial tools to track spending and ensure you stay within government benefit limits.
6. Secure Your Child’s Financial Future with Purple
Planning for a child with disabilities takes careful financial management and an understanding of available resources. Purple helps you track benefits, manage savings, and plan for the future with confidence.
💜 Get started with Purple today and take control of your child’s financial security!