Financial Strategies for Special Needs Families

How do you financially plan for a child with special needs? Paige and Scott are navigating the emotionally complex and financially challenging landscape of raising their son who is considered to be level 3 on the autism spectrum. They have questions about being financially prepared to support their child throughout adulthood, while setting their second child up for success.

Kim, a Morgan Stanley Financial Advisor, is a mother of a special needs child herself and offers tailored solutions for Paige and Scott. Hear their conversation on estate planning, ABLE accounts, special needs trusts and second-to-die insurance policies that can help secure their children's futures.

For more information about this episode and the topics covered, check out our episode page and explore how you can connect with a Morgan Stanley Financial Advisor.  

[DISCLOSURES]

The conversation in this podcast is solely intended as a case study between a client/prospective client with a Financial Advisor and is not intended to serve as individualized investment or financial advice. No portion should be construed as a recommendation to employ any of the guidance contained within this podcast. Each investor has their own unique facts and circumstances and must determine what is appropriate for their own situation. Participants in this podcast are not compensated and are not affiliated with Morgan Stanley. 

Investing involves risk, including the potential loss of principal invested. 

Important considerations concerning ABLE Accounts: ABLE Accounts, which are tax-advantaged savings accounts for eligible individuals with disabilities and their families, were created as a result of the passage of the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act. The beneficiary of the account is the account owner, and generally income earned by the accounts will not be taxed. Contributions to the account made by any person (the account beneficiary, family and friends) will be made using post-taxed dollars and will not be tax deductible, although some states may allow for state income tax deductions for contribution made to an ABLE account.

The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age. Starting in 2026, the eligibility age of onset of disability will be raised to 46 years of age. If you meet this age criteria and are also receiving benefits already under SSI and/or SSDI, you are likely eligible to establish an ABLE account. Generally, the total annual contributions by all participating individuals, including family and friends, for a single tax year is $19,000 (for 2025) plus, in certain cases, the lesser of the amount of the beneficiary’s compensation or the amount equal to the poverty line for a one-person household. The total limit over time that could be made to an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts. The first $100,000 in ABLE accounts would be exempted from the SSI $2,000 individual resource limit. If and when an ABLE account exceeds $100,000, the beneficiary’s SSI cash benefit would be suspended until such time as the account falls back below $100,000. It is important to note that while the beneficiary’s eligibility for the SSI cash benefit is suspended, this has no effect on their ability to receive or be eligible to receive medical assistance through Medicaid. The 2017 Tax Cuts and Jobs Act allows funds to be rolled over from a designated beneficiary’s 529 plan to an ABLE account for the same designated beneficiary or a family member of the designated beneficiary (including the beneficiary's spouse). But this does not apply to the extent the amount distributed when added to other amounts contributed to the ABLE account exceeds the annual contribution limit ($19,000 for 2025).

A “qualified disability expense” means any expense related to the disability of the designated beneficiary and are for the benefit of that designated beneficiary in maintaining or improving his or her health, independence, or quality of life. These may include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses. As of now ABLE accounts are not available through Morgan Stanley, but they can be purchased directly through a state offering an ABLE plan.

Individuals who qualify for governmental benefits may use a combination of a supplemental needs trust, an ABLE account, and perhaps also an account at a website such as helphopelive.org, which is a non-profit that provides the ability to create a fundraising page to cover the costs of uncovered medical expenses. As it is a non-profit, donations to your fundraising page are tax deductible, and the non-profit as well as your lawyer can help guide you as to how to use your funds without impacting governmental benefits.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning, charitable giving, philanthropic planning and other legal matters.

Insurance products are offered in conjunction with Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates.

If an account owner or the beneficiary resides in or pays income taxes to a state that offers its own 529 college savings or pre-paid tuition plan (an “In-State Plan”), that state may offer state or local tax benefits. These tax benefits may include deductible contributions, deferral of taxes on earnings and/or tax-free withdrawals. In addition, some states waive or discount fees or offer other benefits for state residents or taxpayers who participate in the In-State Plan. An account owner may be denied any or all state or local tax benefits or expense reductions by investing in another state’s plan (an “Out-of-State Plan”). In addition, an account owner’s state or locality may seek to recover the value of tax benefits (by assessing income or penalty taxes) should an account owner rollover or transfer assets from an In-State Plan to an Out-of-State Plan. While state and local tax consequences and plan expenses are not the only factors to consider when investing in a 529 Plan, they are important to an account owner’s investment return and should be taken into account when selecting a 529 plan.

Tax laws are complex and are subject to change. This information is based upon current tax rules in effect at the time this was written. Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax or legal advice. Individuals should always check with their tax or legal advisor before engaging in any transaction involving 529 Plans, Education Savings Accounts and other tax-advantaged investments.

Investments in a 529 Plan are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so an individual may lose money. Investors should review a Program Disclosure Statement, which contains more information on investment options, investment objectives, risks factors, fees and expenses and possible tax consequences. Investors should read the Program Disclosure Statement carefully before investing.

Important information about your relationship with your Financial Advisor and Morgan Stanley Smith Barney LLC when using a Financial Planning tool. When your Financial Advisor prepares a Financial Plan, they will be acting in an investment advisory capacity with respect to the delivery of your Financial Plan. To understand the differences between brokerage and advisory relationships, you should consult your Financial Advisor, or review our Understanding Your Brokerage and Investment Advisory Relationships brochure available at https://www.morganstanley.com/wealth-relationshipwithms/pdfs/understandingyourrelationship.pdf

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