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Perspectives On Estate Planning, Vol. 1.01: “Special Needs Families Require Special Planning”

Perspectives on Estate Planning, Vol. 1.01: “Special Needs Families Require Special Planning”

        This month Redding Law, PLLC invited David Alvarez, a Certified Financial Professional with Intercontinental Wealth Management, in San Antonio, Texas to share his perspective on financial planning for families with special needs individuals. At Redding Law, PLLC we understand that Estate Planning is a collaborative effort centering around a client but involving a team of professionals in order to fully understand each client’s situation and craft the best solutions.

By David K. Alvarez, CFP®

If you are reading this article, chances are you have a friend or family member that is caring for a special needs child. In the United States alone, recent estimates show that about one of every six children (roughly 15%) aged 3 to 17 have one or more developmental disabilities . The Centers for Disease Control and Prevention defines Developmental Disabilities as “a group of conditions due to an impairment in physical, learning, language, or behavior areas. These conditions begin during the developmental period, may impact day-to-day functioning, and usually last throughout a person’s lifetime.” The challenges for parents or guardians are many and may seem insurmountable, from daily care and maintenance to the financial cost of rehabilitation or treatment. This creates a significant need for financial planning. Parents of a special needs child often struggle to plan for their own retirement as well as the long-term needs of the child. Thankfully there are several steps they can take to mitigate financial risk and ensure their loved one will always receive support and care, even when they are no longer around to provide it.


When special needs children turn 18, they are legally adults. If they are not able to care for themselves or live independently, the parent needs to apply for guardianship . The Texas Guardianship Association defines a guardianship as “a court-supervised administration for a minor or for an incapacitated person.” This is an important first step, and should be considered along with who would care for the child (or adult) if the parents are not able to do so. In addition to consideration of an ideal future guardian, steps for appropriate care of that child should be diligently specified in writing. These instructions should include the child’s medications, routines, interests, fears, family members, close friends, and any other details that will allow a future guardian the best opportunity to maintain the quality of life the child currently maintains.

Retirement Planning

Financial planning can be a challenge for parents of special-needs children, especially when thinking of their own retirement. How do you pay for the child’s care when you are retired?
The first option everyone should consider is government assistance. Disabled children up to age 18 can receive Supplemental Security Income (SSI) from Social Security along with Medicaid if their parents meet the program’s low-income and asset requirements . After the child turns 18, they should be able to qualify for these benefits on their own. This underlines the importance of making sure assets and beneficiaries are titled correctly. Along with SSI and Medicaid, special needs families should consider Social Security Disability Insurance (SSDI). SSDI pays benefits to adults with disabilities (if the disabilities began before the adults turned 22 years old). SSDI is also available for a child if one of the parents is deceased or if one of the parents is already receiving Social Security retirement or disability benefits.

Additionally, most folks saving for retirement are aware of the benefits of saving money in a qualified retirement plan or an individual retirement account (IRA). Parents of special needs children should consider adding an ABLE account to their savings plan. In 2014 Congress passed the Achieving a Better Life Experience (ABLE) Act which allows for the creation of tax-advantaged savings plan for the disabled. Earnings and withdrawals for expenses are federal and state tax free. Also, assets below $100,000 in the ABLE account will not be counted as a resource for SSI and Medicaid testing. Over 20 states have created ABLE accounts and most of those states do not have residency requirements.

Estate Planning

Recent polls show more than half of Americans do not have a will . While this may be problematic for most, with a special needs child this can be a tragic mistake. Parents of a special needs child absolutely should create a will and consider including a special needs trust with an appropriate trustee as well as a guardian for the child. All assets intended to be passed along for the benefit of the special needs child should go into the trust. If done properly this will ensure the child won’t lose government benefits such as SSI or Medicaid.

When looking at their assets, parents and guardians sometimes overlook accounts where a child may be listed as a beneficiary (e.g. IRAs, Retirement Plans, Life Insurance, Transfer on Death, etc.) If those assets are intended to benefit the child, it is important to designate the special needs trust, not the child outright, as the beneficiary. If these assets end up in the name of the child individually, the child may lose access to government benefits. Another benefit of a special needs trust is that assets in the trust should be protected from “creditors and predators” if the child is ever sued.


All this planning can add a tremendous amount of value, but it can also be rendered ineffective if the plan is not communicated with and understood by all family members and loved ones who care for the child. For example, parents of a special needs child recently informed us that their parents (grandparents of the special needs child) transferred money into a 529 plan for the special needs child. That child may not be able to attend college, and those funds can only be used for qualified college education or rolled over to a different child’s 529 plan. This family could have used help paying for the child’s expenses related to medications, physical therapy, and daily tutoring. If a special needs child has wealthy family members who would like to help financially, writing a check to the parents or funding a 529 may not be the most efficient way to do so because those would be subject to federal gift taxes. There are likely educational or medical expenses that family members would be able to pay directly, which would not qualify as a taxable gift . It makes sense to have regular family meetings to explain the plan and keep everyone updated with any recent or important changes.

The challenges of caring for a special needs child can be daunting. A financial planner with experience in special needs planning can introduce you to the appropriate service organizations, and important advisors such as attorneys and accountants, and will partner with them to make sure the optimal plan is put in place for you and your family. A well designed financial plan should put you in a position to achieve your retirement goals and ensure your child always receives the highest quality care, love, and support.

This article was previously published in the October 2017 issue of San Antonio Medicine, the official publication of the Bexar County Medical Society. All opinions expressed are the author’s own. 

Meet The Author

David is a Wealth Advisor to a variety of Intercontinental customers, including individuals, charitable foundations and 401(k) plans. He works with customers, their families, their tax and legal advisors, and boards of directors to develop a comprehensive approach to wealth management issues. His strategies address financial planning, investment and retirement advice, business succession, risk management, estate planning and philanthropic programs. David’s understanding of our customers’ specific financial goals informs his customized plans, which are designed to help achieve those goals.
David’s previous experience includes over 13 years as an advisor with J.P. Morgan Private Bank in New York, Chicago, and San Antonio. Currently he serves on the Board of Directors for the Blood and Tissue Center Foundation and the Planned Giving Council of San Antonio. David is also an active member of the San Antonio Advisory Council for the Children’s Rehabilitation Institute of TeletonUSA, the Founder’s Council of the Texas Biomedical Research Institute, and the San Antonio Estate Planner’s Council.
David grew up in San Antonio where he attended Antonian College Prep. He earned his BA in Economics and History at Northwestern University, where he met his wife Meredith while they were both students there. David and Meredith live in San Antonio with their two boys, Josiah and Theodore. David may be reached at (210) 271-7947 or For more information on Intercontinental, please visit

Click here to review our estate planning services for special needs individuals, including Supplemental Needs Trusts or, click here to contact us with your questions.
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