Being a caregiver to an individual with a disability can be a demanding, and costly, job. Under the Americans with Disabilities Act (ADA) an individual with a disability is defined as a person who has a physical or mental impairment that limits one or more major life activities.[1] This individual can be a young child or an older adult, and their care can vary from light support to full dependence. That's a wide net that includes a diverse population of individuals who need caregivers. In the United States, at least 53 million people identify as a caregiver.[2] And these numbers are increasing due to the large population of older adults.[3]
The Financial Challenges of Caregivers to Family Members With Disabilities
As important as caregivers are to this growing population, they struggle with their own challenges. From lack of sleep to taking time off from work for doctor and therapy appointments, caregivers often put their own needs last. At the end of the day, lost income due to family caregiving is estimated to be a staggering $522 billion each year.[4]
Proper financial planning is essential for this population, not only because the health and safety of the individual with the disability is at stake, but because the caregiver is at risk of burnout. Here we discuss key financial planning steps the caregiver can take so both they, and the person with the disability, are more likely to thrive.
1. Organize Your Finances
If you're a caregiver, it may seem like you don't have a moment to spare, but taking time to assess your current financial situation can pay off in the long run. A great first step is to make sure your finances are organized. Especially when simplifying your life can take away unnecessary stress.
For example, online banking which includes virtual check deposits, the ability to transfer money as well as easily keep tabs on assets, can save you time by avoiding unnecessary errands.
2. Consider Flexible Working Arrangements
It may seem overwhelming to ask for help, but some companies offer paid leave to an employee who has a family member that needs immediate care. Another option is to use the Family Medical Leave Act which offers eligible employees unpaid time off to care for a loved one.[5] This might require working with a financial planner to make reduced working hours a financial reality.
If reducing your workload or taking time off isn't an option, you could ask your employer to adjust your working hours to better accommodate your current situation.
Understanding long-term care insurance benefits available through an existing plan is another way caregivers can find support. You may be able to receive a daily amount for assisting someone with daily living activities.[6]
3. Start a Special Health Savings Account
At Vivid Crest Bank , our own employees have firsthand experience with how difficult life can be as a caregiver. One employee provides care for both her husband who has ADHD and her son who was diagnosed with autism and ADHD. She calls herself the "cruise director" of the house. She oversees everything, including doctor's appointments, medications and more. The family has a lot of medical bills. Every year she plans how much to put towards her Flexible Spending Account (FSA).
A Flexible Spending Account (FSA) or Health Savings Account (HSA) may be offered by an employer during insurance enrollment season. These plans allow an employee to set aside pre-tax dollars for medical expenses. Employers may also make contributions to add to your FSA. Money can be used for co-pays, prescriptions and other necessary medical expenses.
4. Tap Into Government Programs for Financial Support
A good place to find financial support is your state department of human resources. Many states provide Medicaid, a supplemental insurance program.[7] Medicaid programs in each state function differently. Some caregivers may be able to take advantage of Medicaid but, unfortunately, the program can be limited to families with lower income. It's important to check with your state laws to learn if you qualify or not.
For parents of children with specific health needs, the Medicaid Waiver program may help families even if the family has a higher income.[8] The goal of the Medicaid waiver program is to keep children, who may need additional medical support, in their homes (rather than requiring care in a facility).
For those caring for individuals over the age of 60, Medicaid has a self-directed care program allowing the person with disabilities to determine how the caregiver assists them[9].
Medicaid is a complicated program and caregivers may not be able to benefit. When government assistance isn't available, it's beneficial to consider other ways to financially plan. For example, a trust, or an ABLE account, may be a good way to protect your loved one. This is the route one RVC employee's family pursued to help set a child up for the future.
5. Future-proof Your Loved One's Finances
Both a special needs trust and an ABLE account are great options, but they each have pros and cons. Here, we discuss them both.
Special needs trusts
A special needs trust is a great way to set aside money for medical costs and other living expenses for a person with disabilities. A special needs trust allows the individual to receive gifts and other funds without losing eligibility for certain government benefit programs they may be eligible for now or in the future.
For example, even if a caregiver is unable to receive state funding due to income limitations, when their child with disabilities becomes an adult, the child may then qualify for Medicaid. Still, under the Medicaid program, individuals may not be able to receive funding when they have more than a certain amount in assets. The amount varies by state [10]. This is where a special needs trust can come in handy. Money can be contributed to a special needs trust and then used to cover medical equipment, therapy, travel and other necessary expenses.[11]
A special needs trust can put a worried parent's mind at ease. Many caregivers, especially those caring for a young person with disabilities, are concerned about the future when the caregiver is no longer around. Since a special needs trust is managed by a trustee, it's a great way to ensure that their loved one is financially cared for, whatever the future may hold.
Unfortunately, a special needs trust can be costly to set up since an attorney is usually involved.[12] If cost is a deterrent, an ABLE account may be a better choice for you.
ABLE accounts
An ABLE account is another way to set aside money for a person with disabilities. An ABLE account is available to individuals who acquired a disability before the age of 26 (but that will increase to age 46 in the year 2026).[13] In 2023, up to $17,000 can be contributed to an ABLE account each year.[14] The money in this account can grow tax-free and can be used for health and other basic living expenses. Medicaid can be retained no matter how much is in the account.[15]
One downside to ABLE accounts: When the beneficiary dies, the funds remaining in the ABLE account—after all outstanding qualified disability expenses are paid—must be used to reimburse the state for medical assistance (Medicaid) benefits received by the designated beneficiary (if the state files a claim for reimbursement).[16]
Eligible individuals can have both an ABLE account and a special needs trust[17].
6. Look at Other Financial Planning Resources for Caregivers
Many local, state and federal government programs and charities exist that can help caregivers get support and find resources. We've listed a few below:
- • The ARC of the United States: This non-profit supports people with intellectual disabilities so they can live their best life. They advocate for better public policy and provide resources to families. Many states have individual chapters.
- • State Department of Human Resources: Many states have a department of human resources that lists programs that are available to help families care for a person with disabilities. For example, respite programs may provide nursing care directly or reimburse families to find and pay people to provide respite care. Certain state programs can also offer money for home modifications or even summer camps.
- • Pacer Center: Champions for Children with Disabilities: This Minnesota-based non-profit provides resources for families with a child living with a disability in the state. Advocates are available to explain the early intervention system, help create a school-based individualized education plan (IEP) and explain medical support.
- • United Way Caregivers Coalition: This New Jersey-based non-profit organizes resources for caregivers. They offer educational videos, direct parents to early intervention programs and help parents support dependent children as they transition to adulthood, among other things.
- • Family Caregiver Alliance: This national non-profit caregiver support organization has comprehensive lists of resources by state. They also offer support groups, events, classes and programs on caring for yourself.
The Bottom Line
Caregiving can take a toll on the caregiver's health as well as their financial resources. Before reaching the point of burnout, assess your situation. Check your current finances. Reach out to state and local resources that can guide you. Don't be afraid to ask for help!
At Vivid Crest Bank , our employees explain that it's important for people to know that, while navigating this, you're going to try a lot of things that won't work. Trial and error are key components to finding what's a fit for your family.
Getting the right support might not be straightforward, but the most important thing is to put in the effort to find care for both you and your loved ones.
Jaclyn Greenberg writes about accessibility, inclusion, parenting and personal finance. You can find her writing in The New York Times, CNN, Wired, Parents, Fodor's, Good Housekeeping and other places. You can connect with Jaclyn on LinkedIn.
READ MORE: Financial Planning for Those Who Don't Like Finances
Source/references
- https://www.ada.gov/resources/disability-rights-guide/#:~:text=An%20individual%20with%20a%20disability%20is%20defined%20by%20the%20ADA,as%20having%20such%20an%20impairment.
- https://acl.gov/sites/default/files/RAISE_SGRG/NatlStrategyToSupportFamilyCaregivers.pdf
- https://acl.gov/sites/default/files/RAISE_SGRG/NatlStrategyToSupportFamilyCaregivers.pdf
- https://acl.gov/sites/default/files/RAISE_SGRG/NatlStrategyToSupportFamilyCaregivers.pdf
- https://www.dol.gov/agencies/whd/fmla/family-caregiver
- https://www.annuityexpertadvice.com/long-term-care-pay-family-caregivers/
- https://www.medicaid.gov/
- https://www.investopedia.com/medicaid-waiver-5217848
- https://www.medicaid.gov/medicaid/long-term-services-supports/self-directed-services/index.html
- https://www.medicaidplanningassistance.org/state-specific-medicaid-eligibility/
- https://specialneedsanswers.com/what-can-a-special-needs-trust-pay-for-17061
- https://specialneedsanswers.com/able-accounts-vs-special-needs-trusts-its-not-necessarily-eitheror-18618.
- https://www.nytimes.com/2023/01/20/your-money/able-disability-savings-accounts.html
- https://www.ablenrc.org/able-account-contribution-limits-2023/#:~:text=An%20annual%20total%20of%20%2417%2C000,Special%20Needs%20%2F%20Pooled%20Trust
- https://www.disabilityscoop.com/2023/01/09/irs-increases-limit-for-able-accounts/30188/#:~:text=Created%20under%20a%202014%20federal,much%20is%20in%20the%20accounts.
- https://secure.ssa.gov/poms.nsf/lnx/0501130740
- https://www.investopedia.com/special-needs-trust-vs-able-account-5217834