By  Derrick Allen Brooks

Planning the finances for a child with special needs deserves special attention from every parent.  With ever-changing laws and legal procedures, it’s important for families to regularly revisit their financial plans to ensure their sons or daughters with disabilities are well-prepared for their futures. 

Altogether, 12.3 percent of American children ages 5 through 17 have difficulty performing daily activities, such as communicating, understanding school work, eating, dressing and walking, according to  “America’s Children 1999,” a report of the Federal Interagency Forum on Child and Family Statistics.  Federal, state and local governments are constantly researching and re-evaluating a variety of issues relating to this considerable and beloved part of our population and families.  That makes it even more important for parents to keep cognizant of, and current with, their personal planning practices.


For example, it’s important to know that an inheritance may cause many problems for their child, says the Federal Consumer Information Center.  Under current federal law, any inheritance worth more than $2,000 disqualifies disabled individuals from most federal benefits, such as supplemental security income (SSI) and Medicaid, as well as some state programs.  This is an enormous loss for many, reports the National Information Center for Children and Youth with Disabilities (NICHCY), since critical services such as supported employment and vocational rehabilitation services, group housing, transportation assistance and personal attendant care could be jeopardized. 

This is why it’s so important to develop a “special needs trust” – a legal document – in which the family leaves chosen resources, such as money or property, to the trust, says NICHCY.  It is managed by a trustee on behalf of the person with the disability, and is given absolute discretion to determine when and how much the person should receive. 

There are many types of Special Needs Trusts that serve different purposes, says The Arc, and laws affecting trusts vary state to state.  In addition, the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) allows a parent of a child with a disability to set aside funds in a supplemental needs trust.  Based on the government’s stringent requirements for trusts, it is imperative that the trust be carefully worded and constructed.  Working with a knowledgeable legal and financial expert, particularly in the area of children with disabilities, is key.

While some families may require a reallocation of the assets they already have, some families may seek more assets to allocate.  In this case, permanent life insurance may be a solution.  A permanent second-to-die life policy often makes the most sense since the death benefit becomes payable only when the surviving parent dies – the time when the funds will be needed.  This money can then be “housed” inside a special needs trust and be used for supplemental long-term quality of care needs.


There are important considerations parents should make when planning the finances for special needs children.  Here are a few suggestions from EParent magazine listed on their web site,   Prepare, review and revise legal documents.  Parents should constantly monitor legal documents such as wills, trusts, power of attorney and healthcare proxies to make sure they are relevant and properly worded.

Develop a clearer vision of how you want your child to live if both parents are no longer around.  Families’ planning efforts should reflect their hopes dreams and aspirations for their loved one.

Develop a written Letter of Intent that will assist future caregivers.  Having a blueprint that provides vital information regarding the child’s physical and mental status, likes and dislikes, medications, history, etc., will be invaluable to future caregivers… and the child.

Only work with knowledgeable professionals that have an expertise in special needs planning.  Specialized professionals should be able to obtain additional resources and services for families, and provide them with updated information on recent law changes in the field.

Provide funding to provide lifetime care and quality of life.  Special needs trusts should be regularly checked to make certain that they are adequately funded for quality lifetime care and quality of life.


There are many national and regional organizations to contact for more information on planning for the financial future for children with special needs and related issues.  Some national organizations include:  National Council on Disability,; National Information Center for Children & Youth with Disabilities,; National Parent Network on Disabilities,; Our-Kids (for families of children and adults with disabilities),; and S.N.A.P. (Special Needs Advocate for Parents), 

Whether a family has substantial means or few assets, a young child or adult child with disabilities, planning for the financial future of a loved one is important all the same.  The fact is, how parents leave their assets after death may greatly affect the quality of life for their son or daughter with special needs.

Derrick Allen Brooks is a Financial Representative with the Northwestern Mutual Financial Network based in Okemos, MI for The Northwestern Mutual Life Insurance Co., Milwaukee, WI. For more information, please call 517-349-0260 ext. 122.

Printed in Volume 1 Issue 12