Results Of New Study: Parents Have No Long-Term Care Plan For Special Needs Kids

It is well known that the vast majority of America’s 2.6 million children with special needs will need costly care long after their parents have passed away. However, a new study from Hartford Financial Services has found that three in five (62%) parents of children with special needs have no plan to cover the cost of caring for the child when they no longer are able to do so. And those that do have a plan often make mistakes that may disqualify their child for government services on which they depend.

The Hartford study polled 580 parents of children with special needs. Nearly 23% of parents surveyed said they spend at least $500 a month to address their child’s special needs. However, less than half of the parents had a plan in place to cover the child’s special needs costs into adulthood. Even parents with a plan for their child made costly mistakes. Half of all parents of children with special needs plan to leave money directly to their child and even more (58%) name their child as a beneficiary of a life insurance policy, either of which could possibly disqualify the child for critical government benefits and services. Only 25% of the parents have established a special needs trust to provide for supplemental needs and expenses of the child, while not disqualifying the individual from receiving government benefits.

The Hartford said:

[P]arents often assume they have to amass a big savings account to cover expenses, which can easily amount to hundreds of thousands of dollars over the course of their child’s lifetime, when individual life insurance can provide a more affordable strategy. For example, … a 45-year-old couple in good health can purchase a $950,000 last survivor universal life insurance policy for $5,000 a year or a $500,000 policy for $2,681 a year.

Parents were urged to take these four steps to help ensure their special needs child is protected:

  1. Work with a professional financial advisor to develop a plan capable of funding a lifetime of support for your special needs child, over and above what the government will provide.
  2. Work with special needs lawyer to establish a special needs trust in order to protect the assets and to ensure the child will qualify to receive government benefits and services.
  3. Speak with the person you want to be your child’s guardian so they fully understand the commitment and are willing to take on the obligation.
  4. Buy a permanent life insurance policy to cover the anticipated cost of care.

The Hartford study can be found here – The Hartford