How to enhance quality of life for your loved one with special needs without affecting government benefits.
Planning for your special needs loved one’s future often involves balancing access to government benefits with a desire to accumulate wealth. While this balance can be tricky, using specific strategies can make the process smoother. In our experience, the following can be helpful in getting started:
1. Understand Government Benefits: Before making any financial decisions, familiarize yourself with the various government benefits available for individuals with special needs. Programs like Supplemental Security Income (SSI) and Medicaid can be essential but come with asset and income limits.
Example: Jane's son, Mark, qualifies for SSI. However, if Mark has over $2,000 in assets,
he may lose his eligibility. Understanding this threshold would help Jane make a more
informed decision in helping to plan for Mark’s future.
2. Establish a Special Needs Trust (SNT)*: An SNT is a legal tool that holds assets for an individual with special needs. Assets held within an SNT are not counted as the beneficiary’s personal assets when determining eligibility for means-tested government programs like SSI or Medicaid.
Example: John wants to leave $100,000 for his daughter, Amy, who has a disability. By
placing the funds in an SNT, Amy can still access essential government benefits while
using the trust for additional needs.
3. Consider an ABLE Account: An ABLE account, which stands for "Achieving a Better Life Experience," is a tax-advantaged savings account for individuals with disabilities. It's a tool that allows those with disabilities and their families to save money for disability-related expenses without jeopardizing certain government benefits.
Example: Emily, an individual with special needs, wants to take art classes. Money from
her ABLE account can pay for these without impacting her SSI benefits.
4. Purchase Life Insurance: A life insurance policy can ensure that there are funds available for your loved one after your passing. Name the SNT as the beneficiary to avoid any complications with benefit eligibility.
Example: Julie wants to leave an inheritance for her children, but also wants to make
sure Samantha, her daughter with special needs, will have sufficient funding to maintain
her quality of life and take care of her medical needs. Julie set up an SNT specifically
funded by life insurance so Samantha is provided for, and Julie’s other children can
receive remaining assets.
5. Regularly Review and Update Plans: As laws, personal circumstances, and your loved one's needs change, it's essential to revisit and adjust your financial strategies. We suggest reviewing on an annual basis.
Example: Sarah set up an SNT 10 years ago for her son, David, who has Multiple Sclerosis. David now requires a wheelchair for mobility and needs to make accessibility improvements to his home. Sarah reviewed David’s SNT recently and realized she and her financial professional need to make adjustments to accommodate David’s new requirements.
6. Educate Extended Family: Ensure that family members understand the financial strategies in place. This prevents well-intentioned gifts or inheritances that could inadvertently jeopardize your loved one's benefits.
Example: Grandma Susan wants to leave $10,000 in her will for her grandson, Lucas, who has special needs. Lucas's parents discuss the SNT with her, ensuring that her generous gift supports Lucas without harming his benefit status.
7. Hire Professionals: Navigating the complexities of financial planning for individuals with special needs can be challenging. Enlist the help of experts like attorneys, financial planners, and accountants familiar with special needs planning. You may want to start by finding a professional with the Chartered Special Needs Consultant designation (ChSNC) A ChSNC is a professional who has received specialized training to help families and caregivers comprehensively plan for the financial and life challenges of individuals with special needs.
In conclusion, while the journey of securing a bright future for your loved one with a disability can seem daunting, with careful planning and the right resources, you can strike a balance between availing government benefits and accumulating wealth.
Chris Ball, ChSNC
As your state may have specialized laws and regulations regarding Special Needs, please consult your own personal attorney or tax counsel for advice on state-specific legal and tax matters.
*Estate Planning services are provided working in conjunction with your Estate Planning Attorney, Tax Attorney and/or CPA. Consult them for specific advice on legal and tax matters.