PROPER PLANNING SUPPORTS PEOPLE WITH DISABILITIES TO LIVE THEIR BEST LIVES

BY ALEXANDRA BAIG, MBA, CFP® 

My family likes playing board games. A favorite is "Settlers of Catan." For those of you who have never played, the object of the game is to gather resources such as bricks, wood, wheat, and sheep and then combine them and use them to build roads, settlements, and cities.

The settlements and cities allow you to collect even more resources and, in turn, build more roads, settlements, and cities. It is not just about accumulating, though. You also have to be strategic about how you use your resources. Eventually, someone has built enough to reach a certain goal in order to be declared the winner. Financial planning is a bit like a game of Catan. You collect resources, use and invest them strategically to generate more resources, and eventually, you have enough to purchase your home, send your kids to college, retire, and maybe leave something to heirs. With the game of Catan, once you have mastered the basic version, there are "expansions" and "extensions." These create more complexity and allow for more players. Financial planning for a family member with a disability is a bit like playing Catan with expansions and extensions. It takes longer and is harder. To continue with the board game analogy, the first step in planning a secure future for your family member with a disability is describing what "winning the game" would look like.

• Living situation: Does the person want to live by themself? With friends? With a spouse or partner? With other family members? With a pet?

• Location: Does the person want to live downtown or in the suburbs or in a rural location? Do they need or want to be by public transportation? Medical or therapeutic facilities? Recreational locations? Their job?

• Employment: Does the person expect to work? Part-time of fulltime? In a paid or volunteer capacity?

• Support: What level of support does the person need at home? At work? When out and about with friends? To travel? To maintain health and safety? How much of this support can be "natural" and how much must be structured and paid?

• Recreation: What does the person like to do for fun? Does it require a budget? A particular venue? Ongoing lessons or training? A membership? Transportation? Equipment?

• Community: Where does the person find a place to belong? At work? In the neighborhood? With a structured social group? On a team? With a worshiping community?

Once the person and family have a vision of adult life, the next step is to forecast the cost of each aspect of the person's desired adult life. Catan is very simple in this regard. No matter who you are or where on the game board you are, it will always take a certain number of resources in a certain combination to build a road, a settlement, or a city. Here is where we have to move beyond the scope of the analogy. In real life, the housing for a person living in the Chicago metropolitan area will cost a lot more than that for a person living in Lost Nation, Iowa (population 408 in 2018). A person, who needs 24-hour-a-day support, will have a lot higher expenses than one who needs only 15 hours a week. Someone who is highly social and very active will have more things to pay for than someone who is a homebody. Someone who has a chronic or significant medical dimension among their disabling conditions will pay a lot for health care.

The third step is to begin to collect, manage, and utilize the resources. The basic Catan game has five types of resources: wheat, sheep, ore, bricks, and wood. If you have a settlement or city on the corner of a piece of land that produces that resource, you will collect it on certain die rolls. You can exchange one resource for another according to your location and certain formulas. You can also lose resources to the "robber" with a particular die roll. It takes bricks and wood to make a road; bricks, wood, wheat, and sheep to build a settlement, etc. In every case, you need to make strategic choices to maximize your store of resources and then combine the right resources in the right ratios to build as much as possible. People with disabilities have three basic categories of resources that will support them as adults.

• Income from work. Many people with disabilities can and want to work. Although it may require more planning, they can spend, save, and invest their income from work just like anyone else.

• Government benefits. People with disabilities may qualify for various kinds of Social Security benefits as well as Medicare, Medicaid, and support services funded by Medicaid waivers. These benefits generally have financial as well as medical eligibility requirements, so it is important to understand the interaction among work income, accumulation of savings, and eligibility for these benefits.

• Family supplements. Some people with disabilities will be able to fully pay for their adult lives with their income from work and the public benefits for which they are eligible. But in many cases, there will be a gap that families will need to fill both while the parents are alive and after they are gone.

People with disabilities need to strategize to maximize each category and combine the categories in the best way to fund their life vision. In most cases, the entire family needs to be part of the discussion and the calculations to make sure that family resources are stretched to do the most for each member. Let us look at a concrete example.

PAIGE'S BEST LIFE: THE SCHOOL YEARS

Paige is a young woman with a developmental disability. She has the capacity and the desire to work – at least part time – and her family supports her in this goal. Paige expects to continue living with her parents for a while, but just as with her neuro-typical siblings, she has a goal of "having her own place" one day. Paige is very social, so she wants to live with one or more friends as housemates or, perhaps, with a romantic partner. Paige loves animals, so she intends to have a dog. She does not expect to drive, but she likes to be active, so she wants to live near public transportation, where ride-share drivers are plentiful and not far from the downtown district. Her faith congregation and her recreational soccer league are important communities for her, so she wants to be within easy commute of services, practices and games. When Paige begins at age 14-and-a-half to work towards her eventual transition from high school to adult life, she and her family make sure that her transition plan includes real-life work experiences, where the wages are processed through regular payroll, and FICA taxes are deducted. Paige also starts her own micro-business, walking and sitting dogs for her neighbors. Paige's parents help her file her tax returns both to claim her refunds from her W2 jobs and to pay self-employment tax on her dog-related earnings.

When Paige is 18, her parents accompany her to the local Social Security office to apply for disability benefits. Paige brings medical evidence of her disability and explains to the agent how her disability limits her capacity to work. She also explains how she will begin paying room and board to her parents as soon as she begins to receive her benefits. This is so that she can receive the maximum SSI for which she is eligible. Paige is approved to receive Supplemental Security Income (SSI) due to her disability. Her payment is reduced for her work earnings, which she reports to Social Security every month, but not for her live-at-home status, because she pays room and board.

As a child/adult child with a disability, Paige can continue to be covered under her parents' employers' group health insurance plan. However, she applies for Medicaid anyway, since she expects to use adult-disability-support services after she ages out of high school; and these services require Medicaid eligibility, since they are funded by Medicaid waivers. Paige and her parents decide that Paige does not require legal guardianship but will use "supported decision making" and have her parents as her financial and medical agents via powers of attorney.

As Paige moves through her school's transition program, she shifts away from academics towards more paid work experience in keeping with her goal of finding a part-time job in the community, once she ages out of school. Based on her part-time paid W2 work, and her dog-related self-employment, Paige earns six Social Security credits before she turns 24. She then qualifies for Social Security Disability Insurance (SSDI) on her own work record. Because of that income and her work income, Paige's SSI is reduced. After 24 months of receiving SSDI, she also qualifies for Medicare. Her group health coverage under her parent's insurance remains the primary payer with Medicare as secondary and Medicaid as tertiary. Paige also opens an ABLE (Achieving a Better Life Experience) account so that she can save and manage a portion of her own money in a way that will not eliminate her eligibility for SSI and Medicaid.

PAIGE'S BEST LIFE: AN ADULT NOW

At age 30, Paige moves into an apartment with two of her best friends. She now has to pay rent and her share of the utilities as well as the personal expenses she paid while still living with her parents. Since it is less convenient for her parents to drive her, she also has additional expenses for public transportation and ride shares. She and her family calculate that Paige's part-time work income, plus her SSDI and SSI will cover 60% of her total independent living expenses. Her parents commit to covering the balance. Paige's parents chose which expenses to cover so that Paige can maintain the maximum SSI payment for which she is eligible.

Once Paige leaves school, she and her parents apply for one of the Medicaid waivers programs in her state. The waiver pays for 10 hours of a job coaching per month through a local disability-service agency. Paige's job coach takes over the school's former role in helping Paige to learn new skills at her job as well as to talk to her employer about reasonable accommodations, particularly in highstress times such as when Paige gets a new supervisor. The waiver also provides for 20 daily living support hours per month. Paige's support worker helps her with tasks such as paying her bills on time, budgeting with her housemates, maintaining a healthy diet, and managing appointments with health care providers.

When Paige is 37, her parents reach their full retirement age and file for their Social Security retirement benefits. Since Paige's disability started before her age 22, she is eligible for so-called Disabled Adult Child (aka Childhood Disability) benefits, based on her parents' work records. Her parents considered filing early so as to start Paige's additional benefit earlier but decided against this course of action, since they were both still working. Paige's DAC/CDB benefit, together with her own SSDI benefit and her work income now make her ineligible for SSI, but she maintains her Medicaid, and thus her waiver-funded services, as a member of a "special group of former SSI recipients". Paige's parents continue to cover the gap between what Paige receives from work and Social Security and Paige's actual living expense.

Paige's parents are aware that they will need to continue to supplement Paige throughout her life, but also that they, themselves, will need to use some of their assets in retirement. They work with a financial planner to calculate the amount that they will need, in addition to their Social Security, to cover their post-retirement living expenses, the additional travel they hope to do, their medical expenses (expected to rise faster than average inflation), and their potential long-term care needs. The parents also want to leave money to Paige's older sister and their grandchildren. If there is enough money, they would also like to leave a small bequest to the non-profit that has provided support for Paige as an adult. The parents work with a special needs attorney to update their wills. Since they had not yet done so, they create a special needs trust with Paige as the beneficiary. They name themselves as trustees and Paige's sister as a successor trustee. They let other family members know about the trust in case anyone wants to include Paige in their bequests.

PAIGE'S BEST LIFE: GETTING ON

Paige's parents realize that Paige will be eligible for an additional amount of Social Security as an Adult Child survivor, but also that Paige herself will retire from work at some point. They will need to fund her Special Needs Trust to continue to cover Paige's unmet needs once they are gone. The family works with their special needs financial planner to decide which assets to use for Paige's parent's retirement, which to use to fund Paige's special needs trust, and which to leave to their heirs without disabilities, with a goal of minimizing taxes and complications in each category. In order to reduce the possibility that a market downturn near the time of their death would leave Paige's trust underfunded, they purchase a survivorship (second-to-die) life insurance policy to cover a portion of the amount they calculate that they will need to fund Paige's trust. They also purchase some long-term care coverage for themselves so they will not deplete too much of their assets if they need extended nursing home care. Although Paige's sister lives in another state, they keep her up to date on the family's documents and plans.

Once the main financial and legal aspects of the family's plan have been implemented, Paige's parents continue to monitor it with their advisors. Their financial planner adjusts the plan's forecasts, based on the actual performance of their investments. Their attorney reviews their trust documents whenever Social Security makes a major adjustment to the regulations governing eligibility. Paige's parents live into their early 90's before they are each unable to manage some of their major activities of daily living without help. They begin to draw on their long-term care coverage to pay for their home-health aids, freeing both Paige and her sister from worry. As their need for support increases, they move into assisted living, and in their final year, into a skilled nursing facility. Although they pay for some of this out of pocket, the longterm care insurance minimizes the hit to their assets.

Once the second parent has died, the parents' estate plan unfolds as they had anticipated. The life insurance policy pays out to Paige's special needs trust. Certain other financial assets are allocated to the trust and others to Paige's sister with the particular bequest to the non-profit agency. By this time, both Paige and her sister are close to retirement and Paige's sister, in particular, is relieved to know that there are sufficient assets in Paige's special needs trust both to provide for the increased daily living support Paige requires to remain living with her housemates and her dog in her own apartment and to cover any of Paige's own long-term care needs so that she is not restricted to living in the type of facility that Medicaid alone will fund.

Catan is challenging, but it is just a game and there is no penalty, beyond losing face, for the player that either mismanages resources or fails to plan ahead. For people with disabilities, however, proper planning makes the difference between having a meaningful, quality life and living within the mediocre limits of what public benefits alone will cover. •

ABOUT THE AUTHOR:

Alexandra Baig maintains her own national financial planning practice, Companions On Your Journey, and also acts as the Benefits Specialist for Clancy & Associates, a Chicago-based law firm focusing on special needs planning. Alexandra has an MBA from the University of Michigan and her CERTIFIED FINANCIAL PLANNER™ designation and is a member of the Academy of Special Needs Planners. In particular, she is well-versed in the government benefits available to people with special needs and the rules governing them. Her goal is to help people with disabilities and their families make the most of public and private money to live the life they chose.