Scott: we have a 6-year-old and a 3-year-old. Um, our 6-year-old is special needs. He's severely autistic, and our daughter is a neurotypical, uh, three and a half year old.
Jamie: Meet Scott. He and his wife Paige are living through one of the most challenging experiences a parent can have.
Paige: Our son actually, of note, he's nonverbal. There's like different areas on the spectrum and he's considered level three. So he actually understands a lot of what you're saying, but has problems with communication. Uh, usually says single words, said Mama for the first time when he was four.
Hearing that come outta his mouth and look at me and kind of recognize who I am was one of the most special moments I've ever had.
Jamie: In the United States, about a quarter of children on the autism spectrum are considered level three, which is defined as being non-verbal, having extremely inflexible behaviour and requiring very substantial support. It's a diagnosis with severe consequences on the wellbeing of a family. And let's be honest about this, their finances too. But even though Paige and Scott are both doctors, they struggled to understand what was happening early on with their son.
Paige: He initially wasn't walking and wasn't talking, has been in therapy since 18 months old. Uh, as you navigate the system, you learn that a lot of speech does not take insurance. So a lot of that is out pocket. It's a full-time job trying to maintain all these therapies, especially if they're not localized in one place, making sure all the therapists stay in contact. Everybody knows what they're doing and what they're working on. Scott and I working full-time how we can make sure we're implementing things at home in a way that we can still be mom and dad. It's, it's extremely challenging.
Scott: You kinda have to recalibrate your expectations as well. Um, 'cause they don't hit the typical milestones. He can get frustrated. And when he has meltdowns, um, he will, he can scream and cry or he will, you know, close himself off in a room or, uh, sometimes when the real bad he'll just bounce around from different activities that he knows he's not supposed to do.
Jamie: Caring for their son has been incredibly challenging, but it has also revealed the strength of Paige and Scott's relationship.
Paige: I would say that this is the reason why. You don't have kids to save a marriage. It's just because , Scott, and I have a very strong marriage and I think our son has made us realize that. Um, 'cause it is definitely a trial of patients, kids in general will test your patients and not only do they know how to push your buttons, they installed them. And when you have to leave events early 'cause he is having a meltdown, or when you can't have sleep during the night because they're up at two in the morning partying. And how do you deal with that? It could be extremely stressful on a marriage
Jamie: And another big stress in their lives is the financial aspect of it all.
Scott: I think we just kind of have learned to accept that there are higher costs associated with. With his diagnosis and, um, and, uh, from every aspect, and not just the therapies directly, but indirect costs, like we're talking about with childcare.
Paige: But I will also say too, it's hard because I think about what does the single parent do? You know we were very fortunate with what we do, and I know there's respite care and other things, but it's hard. It's really hard.
Jamie: And their worries extend beyond the here and now. The care and the therapy and the support their son needs, they also worry about the future.
Scott: It took me a while to kind of wrap my mind around this, but I've come to accept that he's very likely to not be an independent adult and will likely need to live with us or need to be in some kind of group home or facility, which is really hard to even envision with your child.
Paige: I have only allowed myself to briefly think about the future future. Number one because it, it is upsetting. You don't ever want to visualize your child having to be in a group home, or what if his nice sweet tendencies become violent and it needs to be something else, and it's just internally crushing as a mother, and it's already so overwhelming as it is right now. But you have to look at the big picture because all of that stuff is going to cost money. So money that we thought he may make as an independent adult, he's not. So we're gonna need to put that aside. We do have our daughter and we also don't want her to have to stress monetarily or emotionally or you know, wise trying to take care of her brother.
Jamie: Money is always emotional, in a family with a special needs child, the emotion is heightened and so are the stakes.
Scott: You would assume that you would leave your kids. Each, you have two kids, each would get 50% of the estate. But with the special needs kid, you know, who may, who will definitely not be financially independent compared to the other one that, you know, the lawyer really recommended. We consider not necessarily making an equal distribution, which is, um, hard to wrap your mind around. You feel like you're cheating the other child a little bit.
Jamie: And that's where we'll start today. I'm Jamie Roo and welcome to What Should I Do With My Money? An original podcast from Morgan Stanley. We match real people asking real questions about their money with experienced financial advisors. Here at Morgan Stanley, we work with a range of clients. Some are experienced investors, others are new to working with a financial advisor. On this show, you get a front row seat to hear what these initial conversations are like and get answers to some of the questions you might have yourself.
While Scott and Paige are managing the costs of raising their son, they worry about the future if he will never be able to live independently. What can they do now to plan to cover these costs, especially should something unforeseen happen to one or both of them? They need someone who understands their situation and challenges. Kim is a financial advisor at Morgan Stanley who has a special needs child herself.
Kim: We were in the hospital after I had given birth, and you know, leading up to that I had an easy pregnancy. And we found out, my daughter first started with that she failed her hearing test. And ultimately her hearing kind of corrected, but then tons of other doctors became into the mix from the neurologist to the geneticist, to, um, ophthalmologists, I mean, we knew something was up. So we were very fortunate to. Get a diagnosis. Not that it really changed anything because we still were doing physical therapy, occupational therapy, speech, aquatherapy she still has all of that right now and she is nine.
Jamie: thrust into this world of wall to wall care and therapies made Kim feel like she wanted to make a change in her career as a financial advisor
Kim: All these therapists were coming in and all these doctors were just. So selfless helping my daughter and I felt when I went to work, I'm like, what am I doing? Spending my time here when I could be with her? But also just money was getting like going out like crazy just in regards to all the therapies, all the doctors that we had to see to kind of figure out what was going on with her.
And because of that, I started realizing like, okay, as a financial advisor, what do I need to do to plan? And there really wasn't anything out there.
Jamie: So Kim took it upon herself, not just to navigate these waters, but to help others navigate them too. She studied to earn a special designation as a chartered special needs consultant. This gives her the opportunity to provide much needed, specialized advice to parents with special needs children.
Kim: When, you know, two years passed and just seeing all these other kids, like her peers. Walking and talking and you know, running around and your daughter's not. So that's very isolating and as hard as it is, there are people out there that truly understand and so I'd wanna tell people like, you're not alone. find your tribe and kind of, you know, lean on them.
Jamie: Well that's a perfect transition, Kim, because before you start your talk with Paige and Scott, I know that you've already met Paige. You and Scott recently moved across the country to find better services for your son, and that's how you met Kim?
Paige: Correct. And so before we moved, I did what any mom would do and scour Facebook and all the moms groups and ask, And long story short, got connected with a special needs moms group here, and immediately people, including Kim, reached out to me to make sure I was okay in the adjustment. And before I met Kim in this extremely isolating world that we live in. I hadn't met another special needs mother until my child was five and he's six now. So to move to a new place and already have this huge network was incredible. And we met for coffee and just discussed poop, smearing and all, everything that we've been through. And I almost want to cry right now talking about it, but just it was so nice to have somebody who understood where, where you were coming from.
Kim: And I just wanna add too that, you know, meeting you was amazing as well because even in the small community, that's amazing and very beneficial and helps us, there's a whole spectrum of what the special needs children look like and some are, you know, a one off, like have stuff but will ultimately be, you know, pretty okay in life. And then there's people like you and I that have a child with severe needs and really it's, we understand each other. As much as it's isolating, once you do meet people, you realize, wow, their stories could be very similar and they're going through the same things that you are.
Paige: You feel a little less crazy and a little less alone. Even though we are, we have education on backdoor Roths and 529s and all of this, I, I have no idea kind of what else is out there. And we had only kind of scratched the surface. Uh, and I'd love to talk more about it, you know, 'cause I did, we did a 529 for our son. You're like, well, why don't you do an ABLE account? I'm like, well, why should I do an ABLE account? I have a 529 and there's just so much you don't know and there's nowhere to look it up.
Kim: Exactly, and that's one of the reasons why I went and got the certification because it, I figured if I was having trouble as a financial advisor, finding information, people that weren't financial advisors would have even more trouble. And honestly, I've done some talking events and talking to people and watching their faces when I mentioned like an ABLE account and they're like, what is an able account? You kind of like, how, how is this knowledge not out there?
Paige: I still am unclear about an ABLE account and if we can convert the 529 to an ABLE account, and in addition to the life insurance that we already have, is there anything more that we can do to help supplement our son so that our daughter can still have something at the end of it.
Kim: Talking about the ABLE account, it acts very similar to a 529 account, but it can be used for more than education.
Jamie: An ABLE account allows you to save and invest money without losing eligibility for certain public assistance programs. Plus any growth from investments is not taxed and does not count as income if the funds are used for qualified disability expenses, which can include any number of things from food to support services.
Kim: That's one of the easiest things to do right now, and I would highly suggest you do it. You can open up an ABLE account in whatever state you live in, if it's available. If not, you can open an ABLE account in. A different state as long as most of them are national. There's a few states that only have specific for their state, but more often than not their national plans and can be, um, opened pretty quickly online. But it needs to be age under 26 next year. It's going up to age 46
Scott: Sorry to stop you to clarify that. You're saying that's the age you need to initiate the account before it
Kim: have the disability. You can have the account much longer, but they have to have a disability before the age of 26. And there was a lot of talk around it, like what happens for older people. So they are now increasing it to 46.
Scott: right, so it doesn't have to be used, uh, all the money. It doesn't need to be spent by age 26 or something.
Kim: It just having the disability before.
Paige: Actually, that's a good clarification. Yeah.
Kim: Um, and so pretty much all you can draw down on the account immediately for any sort of qualified disability expense. So it's really nice because it's post-tax dollars that are growing tax free that you can use for your child. And one of the reasons that it's really a benefit is because when you have a child with special needs as you're getting SSI, the supplemental income…
Jamie: Just to quickly explain. SSI, it means supplemental security income, which are monthly payments to people with disabilities.
Kim: You wanna make sure that you don't have more than $2,000 in your child's name, but going through an ABLE account, it's protected, it's shielded from the government. So the government can't say, oh, you have $50,000 in this ABLE account. We're not gonna give you government benefits. You can also use those funds immediately for qualified disability expenses, which can range anything from, you know, going to doctor's appointments, therapists, legal bills, food, assisted technology. So there's a lot of uses in the list goes on, but it's very, it, it's just a benefit that you can, you know, put money in, let it grow, and then take it out as you need.
Paige: And can we convert a current 529 to an ABLE, do we lose money doing that?
Kim: Nope, you can convert and it is, um, it just counts towards your contribution. So if you converted it this year would count towards your 2025 contribution, and the max contribution you could have is $19,000.
Paige: So does that mean we can only move a certain amount each year then? Oh, that kind of, that's kind of, that's kind of tough and…
Kim: It’s frustrating, but…
Scott: It's a good problem to have.
Kim: yes, and you can do it time.
Paige: Okay. So that's good to know that there's, you know, a decent amount that you're able to put into it every year
Kim: So a few more things just to mention that are, that differ from the 529. The first thing, you can only have one able account, so you know, five 20 nines. Grandparents can open them for children, for grandchildren, parents can open them, friends can open them, and you can have multiple. But for an able account, you're only allowed one. And everyone's contribution counts towards that limit.
Paige: And that's one per child?
Kim: Yes, one per child. But. Like if, if grandma and grandpa donated, you know, 9,000, then you only have another 10,000 you can put into that account that year. And then the one other thing down the road that you wanna be conscious of is making sure that that account, as you know, over time, it's gonna grow. And then that that account always kind of stays under a hundred thousand dollars because God forbid something happens to your child and the account is over a hundred thousand dollars. The government has a right to take back the money, and also it can kick you off of government aid.
Paige: Wait, so the government can take the all the money out of the account even though it's our money?
Kim: Whatever you, above a hundred thousand, whatever, because they've given you SSI, they've given you aid, so they're entitled to come back and take it from you if it's over a hundred thousand dollars. So you don't want that. So yes, in states, all states have different limits of what the account can actually max out at, but you wanna make sure that you kind of just watch it.
Scott: Okay. So I guess think of it less as a, like a 529 type college savings account and more of a how, how do we care for special needs? Child or adult day-to-day
Kim: Exactly I, it's similar in my like to an HSA, a little bit…
Jamie: So HSA stands for "Health Savings Account" and it's a tax-advantaged account available to people enrolled in high-deductible health plans They can be used for a wide range of medical expenses.
Paige: I guess my concern is I would've loved for that just to be kind of, other than something happens to us, an account for him just to have that keeps growing. So then what do you do after it hits that amount? Like are there other
Kim: You'll use it, you know, you'll use it for everyday living for qualified disability expenses and you can keep adding money. So just you have wanna make sure that it's under the a hundred thousand. But another vehicle would be a special needs trust, which I believe when we met Paige that you mentioned you guys had included in your will, which is a great vehicle.
Jamie: A special needs trust is a great vehicle because not only does it allow parents to transfer assets to their kids, as with any trust, but they would receive that income without reducing their eligibility for public assistance or disability benefits provided by Social Security, SSI or Medicaid.
Kim: And one thing that I highly recommend is putting, you know, a lot of the time, special needs trusts are left unfunded until you pass. And then with that it's like, okay, well what's going in to fund that account? And now this is an account very similar to enable that the government can't touch.
It's protected, especially if it's a third party special needs trust. But what I tended to work with my clients is putting in a second to die insurance policy into this. And what that is, is it's a guaranteed death benefit after the second parent passes. So it would be on both of you, and then once one of you passes, it's still an active account.
No one gets the guaranteed death benefit. But then when the second passes, then the. Special needs trust would get the guaranteed death benefit. And one reason we use this and we'd like it for estate planning and planning, is specifically for the fact that the premiums are much less expensive than if you were to buy a whole life policies for both of you.
And that would kind of be how your child is going to live for the future. And that whether it's your daughter taking care of him or someone else will kind of have a financial pool of money so they don't have to feel the burden of the finances.
Paige: So we can have life insurance through our jobs and have this second to die and the second to die has to be a part of our trust?
Kim: The second to die policy would, you know, we would look at your whole legal and how your legal estate plan and how everything's set up, and whether it's through your trust or just in both of your names with the special needs trust being the beneficiary. That would really depend specifically on how you know your estate plan is set up for us to know.
Paige: But we can still have our own life insurance through our jobs, and this is supplementary.
Kim: Yes, your life insurance through your jobs is great. You know, with everything, what we would do, kind of build out a financial plan for you and your family. We would also look at that life insurance that you get through your job and see if you might need more. You know, you guys are both physicians.
God forbid something happens to one of you and that income can't come in, we wanna maximize to make sure that you guys are gonna be successful down the road, whether it's for your child, children, or for yourselves too.
So the financial plan really takes into account kind of down to the most. Tiniest details, you know, is okay if you guys are like, we wanna take a vacation every year and we wanna spend X amount of dollars on that, we can put that into the plan. It's very specific to your lives, and we can run it to find out how successful you will be in the future.
Paige: And and important to bring up, and I think I brought it up earlier, you know, we're very fortunate for the jobs that we have in being able to make some of these decisions and plan, but it sounds like you're able to do it for anybody of any type of income and maybe make it so that they figure out how can you contribute to this account and still put food on the table? How can you contribute to this account or even doing this account, and you could still get respite care through the government and not have to worry about them saying, you make too much money, or there's too much money for your child.
Kim: Exactly. The ABLE account is definitely something that is accessible to all, and I would highly recommend it because to be honest, the food for that child is a qualified disability expense.
Scott: Oh, I have more of a, uh, question. Just, I don't know if you know, uh, any statistics or, uh, if there's a number out there that, um, as far as expense of having a, like an annualized expense for a special needs child or an autistic child, um, I don't know if there's any numbers like that. I was curious if you knew anything, like what's a, uh, an amount that appropriate amount and that we should be budgeting, uh, for a child like him.
Kim: So pretty much the statistic out there is that a child with special needs costs five times the amount of a, um, neurotypical child over the lifetime, right? So obviously there's gonna be years that you're gonna spend more or less depending on what happens that year. You know, that's it. Hard statistic.
Paige: It's a big number.
Kim: That's a hard statistic to wrap your head around. 'cause you're like, wow, you know, like I, you didn't have five children, you only had one. So, and that's No, but I, I know two, but I'm saying with that statistic, you're like, you planned on having one now, you know, now you have six. So, I mean, there's the financial plan that we would run for you and your family is very specific.
So yes, we can take into account, you know, where you're living, where you. Where you plan to potentially have your child live after you pass or live prior to you passing, but maybe you guys are getting older and you can't take care of him anymore. You know that's gonna involve potentially a nurse coming in or somebody to help with him in your house or a potential group home.
So we have a lot of statistics for what that cost is now, and then we can add in inflation and you know, we can help guide you through those numbers based upon what your needs are. Obviously you can't plan for the surprises, but we do have kind of calculations on what the cost of raising a child with special needs might look like versus a neurotypical child.
Paige: Thanks. No, I think that's great. 'cause I think normally, like you buy a house, you're always told you need. This much for a nest egg. And so how much do we need about for our child to make sure that we're okay when we die and our kids don't have to take care of us, you know, and then that they have what they need. I never, I, I'm surprised, I never thought I'd ever need or want a financial advisor, but there's just so many things that we don't know unless you know.
Kim: Exactly, and you know what's this financial plan most of the time is specifically for the parents and their retirement, but in our situations, you really have to plan for the parents and the child because they're not getting off the payroll and their expenses are not subsiding. You know, obviously we don't know the life expectancy to certain children with special needs, but as we can tell right now, like a lot of them are living long lives. So, you know, so you really do have to plan and it's not just for your retirement, it's to plan to cover that child as well.
Paige: I could say for just people like Scott and I and I'm putting words in his mouth. I'm very good at that, so I'll let him speak for himself too. But I'm already feeling more at ease knowing there's other things that we can do to help our children in the future. And things we wouldn't already know again, like we're physicians and this, there's no roadmap. There's no good chat GPT answer for any of this stuff. It's really finding the community, and I'm so grateful that you're doing this, and I'm so grateful that there's podcasts like this out there to get the word out there about what's available.
Kim: So I think the three most important takeaways from, you know, financial planning with a child with special needs would be to open an enable account, make sure your estate planning is in good shape. Work with a lawyer who has special needs training so everything is done correctly, and also look into potential ways to. Fund a special needs trust down the road, whether it's a second to die policy or other sort of inheritance, just to make sure that everything is protected. And then one more I would add is, you know, doing a financial plan is very, very beneficial to, for the future, 'cause not only do you have to take care of your future, but you also take care of your child's future, which is a little different than other families might have to be dealing with.
Jamie: Well, Kim, thank you so much for sharing your story and your expertise with us. This has been really great.
Kim: Thank you.
Jamie: So Kim covered a lot of stuff. What, how was that for you? Did you learn anything new? Surprising? What was that like?
Paige: It was incredible. I think she brought up a really good point that there's a lot of stuff available, but you don't know how to find it. And there's a lot of stuff changing, and I think it's incredible. There's people like Kim out there who can help lead you towards ways to help support your life and, and your child, so you have a little bit less financial stress is incredible and invaluable. And then I had no idea about second to die, and so definitely gonna look more into that after this podcast.
Scott: Yeah. Uh, for me, I'd heard about an ABLE account, but I really had no idea what differentiated it from other accounts and how to use it and the finer details about it. Uh, also I think the statistic that a special news child cost five times as much as a more typical child is, uh, pretty shocking, uh, but seems to fit what oOur life experience has been so far.
Jamie: What do you think your next steps are gonna be?
Scott: Well, it sounds like we've got some accounts to set up, but we probably need to talk to Kim some more.
Paige: Yeah. Yeah. I think we have a 529. I think knowing the limit is really important, but converting the 529 to an able account, adding the second to die insurance and then saying, do we have enough, you know, for our son, for our daughter, and for ourselves when we retire as inflation and everything changes. You know, that's, I feel like a moving target. I talk to my parents now and they said they're lucky that they, they planned, but who can plan for things like this, you know?
Jamie: Right. Well. wanna thank both of you for taking the time out of your very busy lives to share your story with us, to be so forthcoming and, you know, personal and vulnerable and, um, you know, getting this kind of information out there for people who are in similar situations, 'cause, you know, as you say, it's such an important topic that can be so overwhelming for people, but. On top of everything else, it's good to know that there's help and they're not alone. So I appreciate you sharing your story with us today. Thank you both so much.
Paige: Thank you and thank you for caring to do this topic and to help distribute information about this.
Scott: Yeah. Thank you. It's been a pleasure.
Jamie: If you'd like a deeper dive on what was discussed today, if you'd like to find a chartered special needs consultant in your area, or if you're interested in having a financial plan done for you, come see us@morganstanley.com slash my money. I'm Jamie Rowe. Talk to you soon.
DISCLAIMER: This material has been prepared for general reference and educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Please see our show notes for a full disclaimer on the information provided.
