Morgan Stanley
  • Wealth Management
  • Feb 21, 2017

Financial Planning for Families with Special Needs Children

If your family has a special needs child, it’s critical to be aware of the key financial planning and estate issues which may impact their care.

If one of your family members is a special needs child, you already know that there are often day-to-day challenges that exist alongside the love and care every child needs.

What some families don’t know is that there is a greater urgency to craft a solid financial and estate plan when your family has a special needs child. And often even the most diligent parents or guardians quickly realize there are litanies of planning issues they aren’t aware of.


I thought I knew all the things I needed to do. But now I realize that lots of parents are unaware of some critical steps they need to take.

Dealing with the Unexpected

When Maura Rose's daughter was born a micro-preemie, she faced several worrying years before her child was cleared of any debilitating health issues. Rose, who works as the Chief Marketing Officer for Morgan Stanley’s Private Banking Division, assumed the toughest challenges were now behind her. She didn't realize that they actually lay ahead.

After her application for pre-school was rejected because of social development concerns, Rose learned that her daughter was autistic. With her financial services background, Rose immediately knew to address financial considerations. “I enrolled her in a special needs school, set up an Individualized Education Program (IEP), a 529 plan and drafted a will," Rose explained.

However, it wasn't until she attended an information session conducted by a colleague that she learned that her will was insufficient, that she should have a 529A plan as opposed to a straight 529, and that her daughter would need Medicaid and/or Supplemental Security Income (SSI). “I thought I knew all the things I needed to do," Rose commented. “But now I realize that lots of parents are unaware of some critical steps they need to take.”

The presentation—conducted by Jeffrey Gerson, a Family Wealth Director at Morgan Stanley Wealth Management and a 30-year veteran of the company—laid out a number of steps that parents should take sooner rather than later when planning for the financial well-being of a special needs child. Gerson himself knows a bit about these issues firsthand—he has a daughter and a nephew, each diagnosed with autism.

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Laying the Groundwork

First, Gerson stresses the need to have a will. “Most people in this country don't have a will," he said. “Someone with a special needs child has to have one. “But what's most important," Gerson explains, “is what goes into the will. You have to make sure your assets are left to a Special Needs Trust. And you must specify a Guardian and a Trustee."

According to Gerson, all money or assets intended for the special needs child should go into the Trust—which ensures the child can't access the money and won't lose Federal benefits such as Medicaid and SSI—but stresses that the Trust should be set up even if there are currently no assets to fund it. “Showing as little as $2,000 in assets in the child's name can disqualify him or her from those benefits," he explains.

Another benefit of setting up a Special Needs Trust is that if the special needs beneficiary is ever sued personally, assets in the trust should be shielded from any resulting judgment.

It’s important to remember when naming a special needs child as a beneficiary of a retirement plan, IRA, annuity, insurance policy or a TOD (transfer on death) account, the client and all members of the client’s family should name the Special Needs Trust as the beneficiary—and not the special needs child directly.

Selecting a Guardian and Trustee

Perhaps most importantly, says Gerson, is the selection of a Guardian and a Trustee. “It’s important to remember that selecting a Guardian is two-fold—naming a Guardian and applying for guardianship," he explains.

“At the age of 18 children are legally adults, making them able to make their own decisions. But if your special needs child is not capable of that level of independence, even as the parent you need to apply to become the guardian after the child turns 18." Gerson recommends starting that legal process early because it can take time to finalize.

The other step is choosing a guardian who would care for your child in the event that you are unable—and there are numerous responsibilities that come along with that decision.

Gerson specifies that the guardian should be someone local, with a prior relationship with the child who the child is familiar with. But most importantly, “it should be someone who will love the child, as this could be a lifetime commitment."

Gerson also strongly recommends developing a carefully crafted and very specific set of instructions—your desires for the future care of the child—as well as a guidebook that the guardian could easily access.

“If you don't want your child to be placed in an institution, you need to articulate that," Gerson said. “The guidebook should outline everything: the child's daily routine, what he eats every day, when she gets up every day. Everything. “Special needs children can be very independent and functional," Gerson explained. “But they can also be very dependent on routine." Gerson provided a personal example about his daughter, who is in college and lives in the dorms, but won't eat the dorm food, so she makes her food every day.

“And every day she has to make the same thing -- turkey tacos," he noted. “This is the kind of thing that a potential Guardian needs to know about." The other person who needs to be identified is a Trustee. “The Trustee is a completely different animal from the Guardian," elaborated Gerson. “The Guardian shouldn't have control of the money, the Trustee controls the money, and should be the voice of reason to help make decisions when things get stressful or difficult.

“The Trustee can be a family member, or a close, trusted, responsible friend," he continued. “But it can also be an institution – a bank, or a trust company. Regardless, the responsibility of the Trustee is to invest assets prudently and disperse them responsibly, as necessary."

Getting Started

Gerson notes that a good place to start the process is with a Financial Advisor who is well versed in Special Needs Planning and liability management, and can put you in touch with the appropriate attorneys, accountants and service organizations, but who can—and should—also provide emotional support. “As a parent, you have to become something of a quarterback when it comes to caring for a special needs child. But we can serve as coach, and get you through it, supporting you beyond just helping with your financial planning, but also as someone to lean on.

Gerson adds, “A good Financial Advisor, experienced with special needs planning, will be sensitive to the situation and will provide services with caring and emotional support.”

A Morgan Stanley Financial Advisor can work alongside you and help guide you through some of the steps you should be taking. Talk with your Morgan Stanley Financial Advisor today to get started or find a Financial Advisor near you using the locator below.

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