CFP magazine: “Budgeting to Best Service Family Members with Disabilities”

By Marguerita Cheng, CFP® Pro

CFP magazine, April 27, 2022: According to the 2018 report by the Centers for Disease Control and Prevention, 1 in 4 adults in America (61 million people) have a disability. Similarly, more than 3 million children in America live with a disability, according to the 2019 report by the United States Census Bureau. Because households with children or adults with disabilities have additional expenses, budgeting is crucial. Working with a CERTIFIED FINANCIAL PLANNER™ professional is essential to preparing a budget that best serves your family’s needs.

Here are a few examples of additional expenses a caregiver may incur:

  • A nurse to provide in-home care
  • Additional help for home responsibilities
  • Medications
  • Modifications to your home or your car
  • Assistive devices (e.g., wheelchairs) that will help them carry out certain activities
  • Paying for specialist services (e.g., pediatric services for children)
  • Out-of-pocket costs when health care expenses exceed insurance coverage
  • The cost of travel for doctors’ appointments

Before considering specific budgeting guidelines, you should make sure you take advantage of the help that’s available in dealing with the cost of disability.

CHECK FOR AVAILABLE FEDERAL AND STATE BENEFITS

For families with children or adults with disabilities, there are a wide range of federal and state benefits available. The three most important ones are Supplemental Security Income (SII), Medicaid and Social Security Disability Income.

First, check the eligibility of your family member for these benefits and ensure you are making maximum use of them. These benefits differ between children (younger than 18 years) and adults (18 years and older). You need to understand these differences and their financial implications for effective planning.

Using Medicaid waivers allows you to sidestep certain rules and cater to people with specific needs. Remember, the waivers vary by state. Be sure to check the Medicaid waivers available in your state and see if there are further opportunities to defray the cost of caring for a family member with disabilities.

CONSIDER ABLE ACCOUNTS OR SUPPLEMENTAL NEEDS TRUSTS

ABLE accounts ensure that people with disabilities can save money to address their future needs without losing the federal and state benefits they are entitled to. Although contributions to ABLE accounts are tax-deductible in only a few states, they grow tax-free and qualified disability expenses covered by the account are also tax-free.

The annual contribution limit for ABLE accounts is $16,000 in 2022. If you need to save more than this, consider a Supplemental Needs Trust (SNT). Although SNTs allow a larger amount of savings, they are more difficult and expensive to set up.

OTHER BUDGETING GUIDELINES

Once you have maximized the benefits available to your family, you can now consider these additional budgeting guidelines:

  1. One-off Costs vs. Regular Expenses
    Expenses such as buying assistive devices are one-off costs while buying medications is a more regular cost. While you can address the former with your savings, you need to include the latter in your monthly budget and deduct them from your income. This differentiation will help you avoid underestimating the regular needs of your family member(s) with disabilities.
  2. Prioritizing Your Needs and Wants
    Because most of the expenses related to disabilities are needs, the “needs” portion of your monthly budget will increase. As a result, you might need to forego some of your wants or budget less for them.
  3. Saving Money for One-off Expenses and Emergencies
    One-off expenses tend to require a larger cash outlay than more regular expenses. Also, emergencies can arise that will require you to spend money you didn’t budget for. Saving ahead is always the best way to deal with unexpected and larger purchases without incurring debt. Because ABLE accounts and SNTs provide tax benefits and are specifically designed for people with disabilities, consider opening one and saving into it every month.

Caring for family members with disabilities can be challenging in many ways, including financially. To handle it in the most financially responsible and efficient way, ensure you speak to your CFP® professional. For more savings tips, visit www.LetsMakeAPlan.org.