Adult-Onset Special Needs: Five Planning Solutions Every Financial Professional Should Know

Many financial professionals understand the unique wealth planning challenges families face when caring for children with special needs. Coordinating government benefits, planning for future caregivers and creating a tailored estate plan are all important issues to consider.

What is less common is an understanding of the financial needs of families with a loved one facing adult-onset special needs. Consider several adult-onset conditions where financial planning is vital:

  • Accidents (motor vehicle, etc.)
  • Military injuries
  • Multiple sclerosis
  • Stroke
  • Early-onset dementia
  • Line of duty injuries (police, fire, etc.)

Initially, financial professionals can leverage their expertise to help clients understand what benefits they may already be entitled to receive. Moving forward, there are several important planning tools you can introduce to your clients to provide solutions they may not have considered.

Every financial professional should know these five planning solutions to help individuals with later-onset disabilities:

1) Special needs trusts
A special needs trust is a powerful estate planning device. However, not every client needs one. There are typically two factors that warrant discussing a special needs trust: 1) the individual qualifies—or may qualify in the future—for need-based government benefits, and/or 2) the individual will need help managing money. The special needs trust allows the individual to benefit from an inheritance to increase quality of life without disqualification from need-based government benefits. A trustee is appointed to manage the money on behalf of the individual and the trust document can set guardrails to protect assets. Depending on how the plan is structured, the trust may also provide estate tax management.

There are different kinds of special needs trusts. Clients should not create a trust on their own—an attorney who specializes in this field should be involved to draft the appropriate trust to fit the client’s situation. Families should take care to review all beneficiary designations and estate plans—including everyone in the family who could leave money to the individual—to coordinate with the special needs trust. A well-meaning family member could accidentally disrupt the plan by leaving assets to the beneficiary outright.

2) ABLE accounts
ABLE accounts, which were created by the Achieving a Better Life Experience Act of 2014, are a relatively new, tax-advantaged investment vehicle for individuals with special needs. Under current law, qualifying individuals may accumulate up to $100,000 in an ABLE account without disqualification from certain need-based government benefits. While tremendously useful, ABLE accounts are not without drawbacks. One is eligibility—to qualify, the disability must have onset before age 26. This means many adults with late-onset special needs may not qualify for an ABLE account.

3) Powers of attorney (POAs)
Many financial institutions will not communicate with anyone other than the account owner (such as a parent or caregiver) absent a valid power of attorney (POA) or court order of guardianship of property. Encourage clients to maintain updated POAs and living wills in the event of incapacity for all members of the family who are over the age of majority (age 18 in most states).

4) Life insurance
Life insurance in particular may help provide peace of mind for spouses, parents, guardians and caregivers of individuals with special needs. When policy benefits are channeled into a special needs trust, the impact is powerful and hard to beat. Caregivers and breadwinners providing for the individual should have adequate permanent life insurance coverage to maintain care if either passes away prematurely.

However, purchasing new life insurance on the life of the individual with a disability may not be an option (or even appropriate). It depends on the condition and the situation. Insurability is typically not guaranteed, so if an adult has dependents relying on his or her income, purchasing life insurance before disability strikes is essential.

5) Disability income insurance
Family members who financially support the individual with a disability (and many times other members of the family as well) should consider their own existing disability coverage. While many employers offer short term and/or long term disability benefits, coverage is often inadequate to replace income and benefits may be taxable. Insurable clients can supplement employer-sponsored coverage with an individual disability income policy to help bridge the gap between the coverage they have and the coverage they need. Even better, disability insurance can be structured to pay benefits income tax free.

Most clients should also work with an attorney who has experience in special needs planning to discuss solutions. Building relationships with other professionals in this market will demonstrate value to your clients and help establish trust.

Words have impact: Listen first
Ambiguity in language makes it even more difficult to talk about this important subject. When it comes to adult-onset special needs, we tend to be more comfortable using the term “disability.” In fact, the phrase “special needs” may pose problems for all ages. In a fascinating study, researchers found the phrase “special needs” does more harm than good, in particular when compared to “disability” or reference to a specific impairment.1 They concluded the phrase “special needs” is vague, conjures negative connotations and promotes segregation of individuals with disabilities.

Based on this research, financial professionals should choose their words carefully, listening first to the language used by the family and the individual. Some will prefer the phrase “special needs,” but others will prefer “disability” or reference to the particular impairment. Remember the need is great and your work is significant, so do not let your fear of using the wrong words prevent you from helping families get the quality financial guidance they need.

With advance planning, you can help your clients hedge the risk adult-onset special needs poses to financial well-being. For clients facing disabilities now, listening and mirroring language used by your clients will help you become a trusted advisor to help identify powerful solutions.

Gernsbacher, Raimond, Balinghasay, and Boston, “‘Special needs’ is an ineffective euphemism” (2016).

Jenna R. Washatka, JJD, CLU, ChFC is an advanced planning consultant with Ohio National Financial Services in Cincinnati, OH. She uses her background as an estate planning attorney to provide technical consultation and case design with respect to estate planning, business insurance and individual retirement planning. At Ohio National, Washatka enjoys focusing on the financial side of estate planning with financial professionals across the country.

Washatka can be reached via telephone at 513-794-7537. Email: