The Overlooked Risk in Every Estate Plan: Disability
Disability is often treated as a remote possibility, something that happens to other people. Yet
one of the most persistent blind spots in planning conversations is disability risk. Disability is not
limited to conditions that we are born with. It can arise for anyone, at any age, across income
levels, and in virtually any circumstance. Comprehensive estate planning is not solely focused
around death; it is also about preserving autonomy during life, including through any period of
disability.
That is why an estate plan that overlooks disability altogether ignores one of life's most
consequential what-ifs and risks falling short if a health crisis strikes.
The Ever-Present Risk of Disability
For many people, death may feel like something that reliably arrives at the end of old age, not
as an imminent or unpredictable risk. The COVID-19 pandemic brought heightened awareness
of illness and mortality to people of all ages and triggered a surge in estate planning as millions
took steps to protect their loved ones and their futures.
Most Americans dramatically underestimate both the very real risk and significant financial
consequences of disability.
- Approximately 1 in 4 20-year-olds will experience a disability lasting 90 days or more before
reaching age 67.1
- About 13 percent of Americans are classified as disabled,2 yet two-thirds of workers believe
their own risk of long-term disability is just 1 or 2 percent.3
- More than half of Americans turning 65 will develop a disability serious enough to require
long-term services and supports.4
- Illness, not accidents, is the leading cause of disability, and mental health conditions
account for roughly 1 in 10 long-term disability cases.5
- Households with a working-age disabled adult need 28 percent more income on average, or
an extra $17,000-$18,000 annually, to maintain the same standard of living due to higher
expenses for healthcare, equipment, personal care, housing, and lost earnings.6
Although many disabilities are temporary, a significant share are not. About 1 in 5 adults (22
percent) will have a disability for more than five years.7 The longer somebody is disabled, the
more it impacts their finances. Estimates suggest that a 35-year-old earning $75,000 who
suffers a permanent disability could lose up to $2.25 million in potential earnings by age 65, and
a disability beginning at age 45 could result in more than $1 million in lost lifetime income.8
Making Planning Decisions Before Disability Strikes
Because incapacity can strike without warning, you need to have incapacity planning in place
before it becomes necessary, not after. Many planning decisions require legal capacity (the
cognitive ability to make decisions) to create them, and if documents are executed after capacity
is lost, they are likely to be challenged or invalidated.
Delaying planning can also have severe financial consequences because it may necessitate
additional costly legal procedures at a time when care expenses may be rapidly mounting while
income and savings decline. For many households, even a short disruption can be destabilizing.
- Roughly three-quarters of Americans live from paycheck to paycheck, leaving little margin to
absorb the financial shock of disability, particularly a prolonged one.9
- Nearly 4 in 10 cannot cover an unexpected $500 expense, let alone sustained increases in
healthcare, housing, or caregiving costs.10
- Approximately 50 million adults lack disability insurance beyond Social Security,11 and the
average monthly Social Security benefit for a disabled worker is under $2,000 per month.12
- Since most Americans have no estate plan, they lack powers of attorney and other critical
disability and incapacity planning documents, forcing loved ones to pursue costly legal
proceedings to get authority to access finances or make care decisions.
If any of these concerns hit uncomfortably close to home, you may benefit from adding disability
protections to your estate plan to increase your financial resilience.
Here are some options to discuss with an attorney:
- Financial power of attorney. Allows someone you trust to manage bills, accounts, and
financial decisions if you are unable to do so yourself, helping prevent missed payments,
account freezes, or court involvement
- Healthcare planning (such as advance directives and living wills). Allows you to
document your medical preferences in advance and name someone to make healthcare
decisions on your behalf if you cannot communicate them yourself
- Advance planning for special needs trusts. Can be planned for in advance either to
support a loved one who is already disabled or to serve as a safeguard if disability arises
later, helping preserve government benefits while providing additional financial support
- Letters of intent. While not legally binding, such letters explain your wishes, routines,
preferences, and priorities in plain language, providing critical guidance to caregivers,
trustees, and family members during unexpected transitions
- Coordinated estate planning for income disruption and care costs. Works best when
paired with broader financial planning that anticipates the potentially destabilizing
combination of lower income and higher healthcare costs
Because disability risks and their consequences can shift with age and change over time,
disability-specific planning measures should be revisited regularly, along with the rest of your
plan.
Disability planning is not alarmist, worst-case thinking. It is realistic, personal preparation for a
possibility that may be difficult to face but, sadly, is far more common than most people expect.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional Counselors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
