About 19 percent of the U.S. population has some type of disability, according to the Census Bureau.

Of adults — ages 21 to 64 — with disabilities, only 46 percent are employed, compared to 84 percent of adults without disabilities.

Many people have children, family members or loved ones who are disabled and need financial support. But special-needs planning is not as simple as saving a few dollars here or there.

After his daughter Sarah was born with Down syndrome, Robert Wrubel, senior investment consultant with Cascade Investment Group, realized he would need to plan differently for her financial future than he had for his first-born.

“After her recovery from heart surgery (when she was 6 months old), we knew she’d be fine from a medical standpoint, after we adjusted to her special needs,” Wrubel said. “But we also knew there would be significant pieces that are different in the financial planning.”

Special-needs children qualify for certain government benefits when they turn 18. But if a child has more than $2,000 in her name, then she won’t qualify for federal benefits.

- Advertisement -

“You have to make sure than you don’t have money in your family’s special-needs person’s name,” Wrubel said. “The estate needs to be set up correctly.”

Typically, parents will split an estate equally among, say, their three children.

But the first step in financial planning for parents or grandparents who have a child with a disability is an estate plan: setting up a separate special-needs trust — also called a disability trust or supplemental income trust.

This allows you “to leave your child a share of your income to improve her quality of life above and beyond what the government would provide,” Wrubel said.

Next is a family savings plan, in which investments have to be titled correctly.

“A common error people make is to fund a 529 college savings plan for their child,” Wrubel said. “But at age 18, it will disqualify them for federal benefits.”

And for the same reason, a 401(k) or an Individual Retirement Account also must not name the special-needs child as a beneficiary.

“It’s very important for people to communicate this to other people, friends and relatives of the child who want to do something to help the child,” he said.

He recommends that parents or spouses “sit down with an attorney who specializes in special-needs planning,” to avoid any pitfalls in the financial planning process.

The next step is to determine what they want for themselves and for their family member — and how will they accomplish it.

Choosing a savings plan and abiding by it is critical.

“If you don’t save for your own retirement, you just have to work longer,” Wrubel said. “But if you don’t save enough for your child or spouse who is disabled, they may not have quality of life for the rest of their life.”

One of the main hindrances to following a savings plan is that people know they are “supposed to do something, but they get down in the weeds so quickly,” he said.

It’s easy to get caught up in the day-to-day caring for your loved one, and end up neglecting the care they will need in the future.

And business owners might need to change their succession planning, if they want to “create value” for their special-needs child.

Of course, parents can set aside additional assets in their names to use, while they are still alive, for their child’s benefit. But when they die, the money must transfer into the child’s special-needs trust.

Generally, Wrubel does not recommend putting money into the special-needs trust while the parents are alive.

“Keep it in a separate account that has a transfer-on-death to the person’s special-needs trust,” he said.

Practically speaking, it helps to break down the cost of everyday items for a budget, for families to see where they can trim costs.

People should pay off debt first, and then start saving for future goals.

He uses a chart to show parents and businesses how taking a bite, if you will, out of cheeseburger prices, can add up to financial security.

The price of a cheeseburger at a restaurant is about $10, while the cost of lunch brought from home is $3. That’s a weekly savings of $35, which is an annual savings of $1,820. At an 8 percent investment growth rate, he said, this adds up to $89,949 after 20 years, and to $222,669 after 30 years.

“Even if you have to tough it out — it’s that important,” Wrubel said. “By the end of the first year, you have enough to start investing and saving. When people sit down to make a financial plan, it gives them an enormous sense of relief to know they’re taking steps to make their lives better. Part of their stress goes away.”

During his seminars for families with special-needs children, only 5 percent have a financial plan, and only 10 percent to 20 percent have done any legal planning.

“About half the people are not aware that putting money into a child’s name jeopardizes their ability to get government assistance,” Wrubel said. “When people realize it’s imperative to have a deliberate plan — they tend to act quickly.”

Rebecca Tonn covers banking and finance for the Colorado Springs Business Journal.