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Providing for Children with Special Needs

Donna Kline, MBA, CDFA®, CDC®, ChSNC®


Finding help
There are state and federal benefits available to help parents and their child with special needs while the child is young. The Individuals with Disabilities Education Act (IDEA) mandates that all school districts provide free appropriate public education to eligible children with disabilities. It guarantees proper education and services at no cost to the family, and allows the child to remain in the school system to age 21. The Individualized Education Program (IEP) is a legal contract under U.S. law, an agreement between parents and the school district to determine the best interests of the child, establish goals, and have a means of measuring success throughout the school year. And in the summer, the school districts combine forces to provide ongoing education for the most needy children with special needs.

Such programs are extremely helpful, especially for working parents. Knowing that your child is being cared for in a way that you have approved by people with credentials and goals is more than comforting.

As the child with special needs turns 18, finding help becomes more difficult. As such, planning as early as possible for the aging child is extremely important. Services are no longer a right guaranteed by the school district. Parents must prove eligibility before receiving government-provided services.

Supplemental Social Security
As an adult, the individual with special needs can qualify for Supplemental Social Security payments of up to $914 per month in 2023, if the individual is unable to “engage in any substantial gainful activity by reason of medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months.” Additionally, the payments are “needs based,” meaning the person must demonstrate that he or she cannot earn more than $1,470 per month, the equivalent of a nine-dollar-per-hour job.

Needs based also means that the child cannot have access to more than $2,000, an amount that has been the same since the early 1970s. Supplemental Social Security recipients are monitored closely; payments will be modified or stopped for a violation of assets or earnings.

Not all assets count toward the $2,000 resource limit. Excluded assets include: the claimant’s home, one automobile, household goods, personal items, pre-paid funeral plot, whole life policy with a cash value of up to $1,500, term life policy, ABLE account containing up to $100,000, and funds in a special needs trust.

If the child works and makes more than $65 in a month, half of what they earn in excess of $85, which includes an allowance for an additional $20 of unearned income, will be deducted from that month’s Social Security check. And if your adult child lives with you, Social Security will treat any food or shelter provided to them at no cost as “in-kind support and maintenance,” which will reduce the monthly benefit by up to $324.67 in 2023.

Special needs trusts
As an asset that does not count toward the Supplemental Social Security resource limit, a special needs trust can play an important role in providing income. Special needs trusts can be either self-funded or funded by a third party.

  • Self-funded trusts, made up of the beneficiary’s existing assets, are also called “pay back” trusts because at the time of death, funds provided by a state Medicaid system for treatments, housing, and other expenses must be re-paid.
  • A pooled trust, also known as a (d)(4)(C) trust, is a special needs trust created by Social Security legislation in 1993 that requires a non-profit trustee to manage the assets of the individual with special needs. Accounts are pooled with others for investment purposes, but each person’s assets are accounted for separately. Any remaining funds when the beneficiary passes away are placed in a “residual” account to benefit other people with disabilities.
  • Third-party funded trusts are typically funded by family members of the child with special needs. It can be funded during the relatives’ lives or by an inheritance, which is set up in a last will and testament to be deposited into a “testamentary” special needs trust.

All three trust account types require a trustee, someone designated to distribute funds. That can be a parent, of course, but typically a back-up trustee is named for when the parents pass away. Some restrictions apply. Distributions must be driven by the trustee, as the individual with special needs cannot have withdrawal powers. As well, trust funds cannot be used for food and housing as that is the use designated for Social Security funds; trust funds can supplement though not supplant government aid.

2014 ABLE Act (Achieving a Better Life Experience Act)
An individual with special needs can access an ABLE account, which is more flexible than a trust. Funds from an ABLE account do not affect SSI qualification, even if used for food and shelter, making it an advantageous supplement to a special needs trust.

Some ABLE Act provisions include:

  • The child must have a qualifying disability diagnosed before age 26. Secure Act 2.0, passed at the end of 2022, includes a covenant that will move the qualifying age to 46 in 2025.
  • The account can contain up to $100,000 if the individual is receiving Social Security income.
  • For 2023 the account can be gifted up to $17,000. An individual with special needs may only have one ABLE account. A 529 account established for the child before special needs were recognized can be rolled into the ABLE account without penalty at the annual limit amount—as can income earned by the child with special needs, also up to the annual limit.
  • Some states have ABLE account payback provisions; others, like Pennsylvania, do not. The payback is different from a special needs trust in that the payback period is limited to the time the account was opened, not the entire lifetime of the individual as is case with the self-funded special needs trust.

Irrevocable life insurance trust
For parents of a child with special needs who do not have the money to fund a trust or an ABLE account, setting up a life insurance policy inside an irrevocable trust can be a workable option for providing funds for the child after both parents pass away.

Social Security benefits
If a child has a disability approved by Social Security prior to age 22, he or she may qualify for an increased Social Security benefit when a parent files for his or her own Social Security. Similar to the spousal benefit, the child with special needs could get half the parent’s Social Security payment amount without decreasing the parent’s monthly payment. This would increase to 75 percent of the parent’s benefit after the parent dies.

Planning with a Special Needs Consultant
Ensuring that a child with special needs has access to appropriate services is very important. Proper planning is critical if parents wish to supplement these services while they are alive and for the decades the child could live beyond their death. As a seasoned advisor raising my own child on the Autism Spectrum I have experience supporting parents of children with special needs. Services include finding investment vehicles that will not disrupt Medicaid or other social security benefit qualifications as well proper planning to ensure there will be income to supplement the child’s lifestyle long after parents have passed. I and my HBKS colleagues are here to help. Call me at 724-934-8200 or email me at


The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.

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