Michael and Carole Maguire’s second daughter, Ally, was born with a rare chromosomal disorder, trisomy 12.
“Doctors didn’t know much about it because it was so rare, but they said she would be profoundly mentally challenged,” Mr. Maguire said. “We didn’t think she would walk or talk.”
Mrs. Maguire set up an online support group shortly after Ally was born in 1999, but there were few other families to lean on at first.
Facing many unknowns, Mr. Maguire said he did the only thing he could thing to do: prepare financially for her future.
“I knew quickly, with her diagnosis, that the most tangible thing I could do was financial planning for her,” he said. “I couldn’t fix her diagnosis.”
Ally is now 19, walking, talking and attending a boarding school for children with special needs. The Maguires, who live in Mansfield, Mass., are just as vigilant with their own financial planning, including retirement. But planning for children with special needs is far more complicated.
For one, wealth improperly distributed can hurt children with special needs, because they risk losing government benefits for their care if they have too much money in their name.
At the same time, their parents need to have more life insurance than typical parents, particularly early in their lives, to ensure there is enough money to care for their child into adulthood.
Most parents are going to need help navigating the benefits that their special-needs children receive, including funding for physical and occupational therapy, reimbursements for specially tailored schools and government assistance when the children become adults.
“You can quantify how much someone needs for retirement or college, but it’s difficult to quantify how much someone needs for disabilities,” said John Nadworny, the lead wealth adviser in the special needs planning group at Shepherd Financial Partners. “We start by looking at what people have.”
In the beginning, planning is complicated by the rush of information about a newborn who is going to need a lot of assistance. Mr. Nadworny said there are five areas to focus on: financial factors, government benefits, legal factors, family and support factors, and emotional factors.
He said that the process takes time, and he suggested laying out a timeline for what needs to be done.
Michelle Smith, chief executive of Source Financial Advisers and a co-founder of the Ideal School of Manhattan, which aims to educate mainstream and special-needs children together, thinks a lot about time. She considers the cost of care for her son Dylan, 17, who has Down syndrome, as “the equivalent of a year of college education for me every year for the rest of my life.”
She, like the Maguires, advocates that parents with special-needs children plan early and revise those plans often.
It’s not easy or straightforward. As parents come to terms with their child’s diagnosis, issues like treatment options, life expectancy and benefits can seem daunting. And the money flows out quickly.
Amy Moy, a professor at New England College of Optometry, and her husband, Erick Moy, a research scientist, live in Winchester, Mass., with their 4-year-old daughter, Evie, who has Down syndrome. When she was born, she had three holes in her heart and was so tired that she struggled to eat.
“Early on when we found out, we thought about her health first, but then we worried, how will she be taken care of financially?” Mr. Moy said. “That caused us to have a lot of fear. The first thing was just understanding how the system works.”
Jaella Laplante worked as the director of a day program for adults with special needs, so when her daughter Declynn, now 3, was born with Prader-Willi syndrome, she knew to apply immediately to programs that offered early intervention.
Years later, she met other parents of children with the condition who had been paying out of pocket for years before they realized they could have had the state cover some of those bills. Costs for services that can help these children run into the six figures annually. Ms. Laplante said getting benefits early had helped keep her costs low.
Government benefits cover basic costs, but more affluent parents often want to supplement their child’s care. This can be tricky.
Parents need to buy life insurance early on to provide for children over their life expectancy. But any money given to a child with special needs could be taken by the government to cover its costs.
One way around this is to set up a special needs trust, which keeps the funds out of the government’s reach.
“The key for eligibility for Social Security disability insurance is the assets,” said Cynthia Haddad, the partner in charge of special needs planning at Shepherd Financial. “Any assets held in the child’s name gets held against them — savings bonds, 529 college plans, custodial accounts, any joint bank accounts. All of that would disqualify someone from the government benefits.”
These trusts, which have become popular over the past decade, avoid that. They are legal entities that allow money to be left for the benefit of someone with special needs, in a way that does not put government benefits at risk.
The trusts require a trustee like a relative or adviser to distribute the money. When the beneficiary dies, the trusts can be structured to repay the government, go to other beneficiaries or fund a charitable wish.
One of the bigger expenses early on is educational costs. These include classroom time but also life skills lessons and executive functioning training.
Many school districts do not have programs to meet the students’ needs. Parents are left with trying to pay the cost of a private education or suing the school district to pay for another school.
The stakes are high. The Riverview School on Cape Cod, Mass., which Ally Maguire attends, costs $87,609 for the school year and an additional $9,400 for the summer program.
Ms. Smith said the cost for the Ideal School ranges from $40,000 a year for mainstream students to more than $120,000 a year for children who need one-on-one support.
Getting reimbursed by a local government is time consuming but can yield results.
“It’s absolutely not based on needs,” said Regina Skyer, founder of Skyer Law. “It’s an entitlement statute out of Brown v. Board of Education. Children are entitled to free public education. But what is the range?”
That’s the key for parents facing large bills. Not all children can go to a private school tailored to their needs. Some have to make do with what the public school system offers.
“Did the school district offer this child a free, appropriate public education?” Ms. Skyer said. “If the judge says, ‘Yes, it’s not the best, but it’s good enough,’ then you’re going to lose your case.”
It’s no wonder parents want to get their children into these private programs. For students ages 18 to 22, Riverview has a program aimed at teaching them skills to live independently and then helps to place them in jobs near the school.
“The classes begin to become more real-life based, so the students begin to learn how to navigate public transportation, use an A.T.M., create a résumé, interview for a job,” said Stewart Miller, head of the Riverview School. “Even if our students are living independently, most have some reliance on Mom and Dad. Most aren’t completely self-sufficient.”
The Maguires, who are in their mid 50s, expect to support Ally as she continues to live on her own. They are budgeting for three in retirement and also making sure there are resources for their older daughter, Kelly, who recently graduated from college.
But they also realize there are some things wealth and good planning cannot help. Mr. Maguire said he worries about his daughter’s safety. “Crossing the street, she’s fine; but if she’s alone and she goes into a bad part of town or she gets on the wrong bus, will she know what to do?” he said.
And then there are the social concerns any parent would have. “Every person wants to be in a home with people they want to be with,” he said. “But you can’t throw money at friendships.”