Financial Planning for Parents of Children With Special Needs

Financial planning is a complex task for all families, but additional challenges can arise when families must meet the financial needs of a family member with disabilities.

Why is financial planning important?

Military families with exceptional family members may struggle to make ends meet despite benefits they may receive to help with care. Financial assistance for purchasing special equipment or home health care services does not cover the many additional out-of pocket expenses that are the norm for these families. Routine expenses may include frequent trips for medical treatment, lost wages as a consequence of care, and purchases of supplies and equipment not covered by benefits. On average, families with members with significant special needs have less earned income than other families because they are less likely to have both parents working outside the home.

When developing a financial plan, you should consider the level or nature of your family member's disability. Some individuals will need continued care and supervision throughout life; others will be able to care for themselves and make decisions with minimal support. As challenging as it may be, financial planning can provide realistic goals for the support of your family member when you are no longer able to provide that care.

What tax benefits are available for special needs families?

The Internal Revenue Service allows many medical and dental expenses to be deducted from your income, provided you itemize the deductions. You may deduct only the amount of your total expenses that exceeds 7.5 percent of your adjusted gross income.

There are many medical and dental expenses that can be deducted. Publication 502 (2013), Medical and Dental Expenses, provides a list of items that you can include when figuring your medical and dental deductions. Additionally, you may qualify for the following tax credits:

  • Child and dependent care credit. A tax credit may be available if you pay for the care of a dependent under age 13, or of your spouse or dependent who is unable to care for him or herself.
  • Impairment-related work expenses. If a person has a physical or mental disability that functionally limits his or her employment, or a physical or mental impairment that substantially limits one or more major life activities, he or she may be able to claim impairment-related work expenses.
  • Earned Income Tax Credit. This tax credit, known as the EITC, is a refundable federal income tax credit for low-income working individuals and families. The credit reduces the amount of federal tax owed and can result in a refund check. The EITC does not generally affect eligibility for Medicaid, Supplemental Security Income or food stamps. For information about how the EITC applies to those in the military and those impacted by disabilities, see the IRS Special EITC Rules page.

Can my family member with special needs receive assistance with tax preparation?

Special IRS assistance is available for persons with disabilities who are unable to complete their return because of a physical disability. Assistance may be obtained from any IRS office or the IRS Volunteer Income Tax Assistance Program.

Telephone help for people with impaired hearing is available using TDD equipment in either English or Spanish. The toll-free number for this service is 800-829-4059. People who do not have this equipment may be able to obtain access to it through federal or state relay services. The IRS TDD service is available 24 hours a day. The IRS also has tax publications in Braille and text formats. Braille materials for the visually impaired are available at any of the 142 regional libraries in conjunction with the National Library Service for the Blind and Physically Handicapped. You can locate the nearest library through the National Library Service for the Blind and Physically Handicapped website.

What is estate planning?

Estate planning is the process of deciding how personal possessions will be divided and distributed among relatives and friends when a person dies. An estate includes what a person owns or possesses such as a home, car, money in savings or checking accounts, life insurance policies, stocks, bonds, furniture or other personal possessions. All families should develop an estate plan regardless of their income level as a way to safeguard their family members' assets in the future. There is no right way to create an estate plan; it should be tailored to meet the family's specific needs. Families may wish to consult a legal assistance attorney for advice on a will, an advance medical directive, power of attorney and/or other legal documents. An estate plan may include:

  • Will. A will is a legal document that directs how one's property is to be distributed among his or her survivors. It should be drafted to ensure that it is valid in the state where a person declares residency.
  • Trust. A trust is a mechanism for managing the distribution of the estate. Property in the trust is held and managed by another person or institution, like a bank, for the benefit of those for whom the trust is created.\
  • Life insurance policies. These policies can provide funds for one's survivors. Other financial resources may be available to the family through the Social Security, SSI and the Uniformed Services Survivor Benefit Plan.

Bequeathing assets worth more than $2,000 to a family member with a disability may jeopardize his/her eligibility for government benefits such as SSI and Medicaid. If you want to learn more about this topic, access the eLearning module on estate planning. In addition to the cash benefits and medical coverage that would be lost, the person may also lose other government benefits, such as supported employment and vocational rehabilitation services, group housing, job coaches, personal attendant care and transportation assistance. A legal assistance attorney can explain issues like this and provide families with strategies for avoiding unintended consequences when drafting a will or a trust. Families may also want to decide whether to appoint a guardian who would be legally responsible for the care of an exceptional family member.

If your child is older and is already receiving government benefits such as SSI, you should begin by calculating what your child spends over and above those benefits. If your child is younger, you need to project what your child may be spending in the future. Remember that there are services parents provide that could represent future expenses for the child after a parent's death, including the costs associated with having a guardian or advocate. Remember to set aside funds for emergency medical needs or dental care as well.

Where can families get financial assistance if needed?

Special needs families can receive financial assistance and assistance with financial planning from a variety of sources:

  • Installation Personal Financial Management Program. The Personal Financial Management Program is offered by each of the services and is designed to assist members of the military in controlling their finances and successfully planning for their financial futures. The PFMP provides classes, one-on-one counseling sessions and additional information designed to educate service members and their families about consumer rights and to help them achieve financial stability.
  • TRICARE Debt Collection Assistance Officers. TRICARE debt collection assistance officers are located at military treatment facilities and the TRICARE regional offices to assist in resolving health care collection-related issues. Contact a DCAO if you have received a negative credit rating or have been sent to a collection agency due to an issue related to TRICARE services. To find a DCAO near you, visit the DCAO directory online.
  • Military Aid Societies. Military aid societies are private, nonprofit organizations that support each of the services by providing emergency financial assistance in the form of interest-free loans and grants to active and retired service members and their families. These include the Army Emergency Relief, Navy-Marine Corps Relief Society, Air Force Aid Society and Coast Guard Mutual Assistance.
  • Social Security Administration. The SSA may provide disability and SSI benefits. The Benefit Eligibility Screening Tool helps you find out if you could get benefits that SSA administers. Based on your answers to questions, this tool will list benefits for which you might be eligible and provide more information about how to qualify and apply.
  • Military OneSource. Financial counseling is also available through Military OneSource. You can access no-cost, face-to-face, short-term, problem-solving counseling sessions to address a wide range of financial issues. To contact Military OneSource by phone, 24 hours a day, seven days a week, call 800-342-9647.


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