(7 minute read)

I heard Karen Ferrero on an episode of the Bigger Pockets Money Podcast (full link below). Karen Ferrero grew up in a middle class family in a small town where she worked throughout high school and college. She became a software engineer and evolved into consulting. After getting married and having two kids, her husband became paralyzed by a motorcycle accident and her son was diagnosed with autism. Karen’s life was turned upside down. She incurred massive amounts of debt between medical expenses, handicap accessibility additions and therapies for her newly diagnosed autistic son. Karen fought through by developing strategies for investing and managing her debt. In the episode she provides helpful insight on how to financially prepare for your child with special needs. Here is a summary of the 3 biggest tips she discusses. 

1. Who Not How:

 “Get professional advice and surround yourself with professional help. Never make a decision under stress or duress” (Ferrero, 2021). Karen’s son was diagnosed with autism at age 2, and five months later her husband was paralyzed by a motorcycle accident. Karen had to continue working, sell their house, buy a new house, hire someone to watch the kids, hire a cab service, utilize family support to take her son to his therapies and add handicap accessibility to their new house. These services totalled about $30,000 extra per year in expenses. She was in a state of financial stress and duress. She outsourced by contacting professionals who could help her manage these unexpected life events. The following list includes professional services Karen utilized. 

1. Debt Consolidation: Karen used Navicore to consolidate all of her debt into one payment. In doing this, Karen was able to pay off her debt and avoid bankruptcy.  She says (2021), “There is forgiveness everywhere, it’s amazing how forgiving or flexible people can be if you just ask.” 
2. Special Needs Trust Attorney: Not just any attorney but an attorney(s) who specializes in special needs trusts: Karen warns (2021), “Do not go to your family attorney…you can get well-intended but misinformation and it could really be harmful in the long run.”
3. Financial Advisor: One who focuses on legacy gifting and special needs estate planning
4. For resources on professionals near you, Karen recommends (2021):
   • The Autism Society of America– each state has their own chapter
   • Easter Seals

2. Invest:

“Flexibility is key…have control and flexibility with your investments” (Ferrero, 2021).  When her children were babies, Karen invested in 529 accounts assuming her kids would go to college.  Currently she suspects none of them will attend.  Although they have 10 years to use the funds and can transfer the funds between her childrens 529 accounts, the money can only be used for college tuition and Karen can only take out what she initially invested. Karen now advises investing in trusts independently by finding flexible investments. “Start with the baby steps…just start! You can’t get time back” (Ferrero, 2021).  Karen also points out it’s extremely hard to estimate annual costs of living for the future of your special needs child. “I’m working for my son because he’s never going to be independent and I want him to have a good quality of life, and unfortunately in this country, good care costs a lot of money, and I don’t know how much money that’s going to take” (Ferrero, 2021). Karen says her son will need housing and 24/7 supervision and care. Listed below are strategies Karen uses to financially prepare for her son’s future.

• Special Needs Trusts: Karen states she made a mistake by setting up a minor account- giving her children the ability to cash out at 21 years old. Instead, she recommends having a trust which provides more flexibility with age for cash out. Karen’s son’s special needs trust account will not go into effect until both parents pass away. Other benefits of a trust include:
  • • Tax benefits
    • Dispersion- the money can become income in the future for your child’s personal care
    • People can gift/send checks directly to the child’s trust account
    • A trust doesn’t factor into your government benefits- you can still get full government benefits, the government doesn’t see the trust as an asset
• Invest independently: If you don’t know what you’re doing or you’re not comfortable at first, Karen advises getting professional help. However you choose to go about investing, Karen (2021) says, “Just start!”
• Max out your 401K: This is another way to increase your personal net worth and it can be moved into the trust later. 
• Life Insurance/Disability Insurance: Karen states (2021), “Insurance is always cheaper when you’re younger, the longer you wait, the more expensive insurance will be…currently my husband is not insurable.” If you’re looking into additional policies, Karen recommends:
• Policy Genius
• Quote Wizard
• Government Programs:  Karen notes that although government programs are available, they can become very overcrowded.  Many people need assistance and services are expensive. She suggests also looking into other states to find where the best quality of service is.

3. Overspending:

Karen admits her biggest mistake was overspending. When Karen’s life changed course, she explains (2021), “I clamped down on my spending”. She started tracking spending and expenses and realized how much needed minimizing. Karen refers to herself as having previously been a big spender, so this financial change was challenging for her. She liquidated any possible assets and spending on “fun” was taken over by medical expenses, therapies, etc. She also drives home the point of outsourcing to professionals who can help. Karen says it took them about ten years to reach a more comfortable financial place where they paid off their debt such as vehicles and credit cards, and were able to begin saving money again. 

If you’re interested in learning more about this topic, consider listening to the full episode HERE or HERE for Spotify users. 

If you’re interested in more free information on business, money or real estate investing, check out the Bigger Pockets Podcast HERE. 

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