tings and many do not want to live their entire lives with their parents or siblings. Many want to work, travel, have a romantic relationship and enjoy social and recreational opportunities. While government benefits will cover some of these expenses, they will not cover all of them. And the people with disabilities who want to and have the ability to do the most are also the people who, due to their capabilities, may be eligible for less public funding than their peers. It will be up to the person with a disability to use work earnings, and the family to use family money, to bridge the gap between what the public benefits will cover and what the person's lifestyle will actually cost.
It is generally a good idea to build two financial plans. The first maps out the adult life income and expenses of the person with a disability. That way, the family can see clearly how financially self-sufficient the person can be and how that may change over time as s/he becomes eligible for additional public benefits, has work income increase due to job tenure or advancement, or decrease due to declining health or has services needs decrease due to maturity or increase due to aging. It also helps the person with a disability and their family to understand the trade-offs between working more and staying eligible for certain benefits that have an income threshold.
The second financial plan maps out the families income and expenses both before and after retirement. The latter expenses must also account for the parents' potential long-term care needs. This way, is it possible to see how much of the family's resources will be consumed during the parent's lifetime and how much will be left over to fund a special needs trust. It also permits the timely mitigation and management of risk through the strategic purchase of disability, long-term care (where appropriate) and life insurance, and helps the parents to make informed decisions about how best to save and invest money. It is also crucial to create, with the help of a qualified attorney with special needs experience, the legal documents that will hold and manage the family's assets in a way that will preserve the eligibility of the person with a disability for the necessary government benefits.
LEGAL PLANNING
As a financial planner who is not an attorney, I can only speak in a very general way about the types of legal documents and structures a family needs to undergird a secure and enjoyable future for their family member with a disability.
Please consult a qualified special needs attorney to help your family define which of these documents is appropriate and necessary.
- WILLS: SSI and Medicaid are means-tested benefits with strict assets limitations as eligibility criteria. It is crucial to ensure that a person with a disability who needs or wants to access SSI and Medicaid (including Medicaid waivers) does not receive by inheritance a sum of money that could render her/him ineligible. For this reason, it is important that the person's parents, as well as grandparents, siblings and any other person who might leave money to the person with a disability, has a will that specifies the money not go to that person directly.
- SUPPLEMENTAL (OR SPECIAL) NEEDS TRUST: A supplemental needs trust holds assets for a beneficiary with a disability in such a way that no ownership is attributed to that person, and s/he remains eligible for SSI and Medicaid. There are supplemental needs trusts that can hold money that already belongs to the person seeking SSI and Medicaid. These are called first-party trusts. There are also trusts that are designed to hold money originating from parents, grandparents, or others. These are third-party trusts. For lesser amounts of assets, families may consider pooled trusts in which each beneficiary has a separate account managed under one master trust for the sake of cost efficiency.
- POWERS OF ATTORNEY: People with disabilities who are over 18 are legal adults and able to make their own decisions when it comes to finance, healthcare and many other areas of life. Moreover, without documentation, a parent is no longer able to obtain financial or health information, or assist in the management of these areas of life for their child with a disability. It is important that the person with a disability designates an agent via a Power of Attorney if s/he needs and wants assistance in these areas.
- GUARDIANSHIP: For people with disabilities who need significant support making financial, healthcare and many other life decisions, guardianship may be appropriate. However, it is important to understand that guardianship strips the person with a disability of certain rights because they are presumed under the law to be incompetent.
Planning for your family member with a disability is a complex and multi-faceted process best accomplished by starting early, engaging skilled advisors and working step by step, using the big-picture qualitative vision as the overall guide.
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.