Recognizing the Challenges of Special Needs Planning
There are 58 million Americans five years of age or older who are identified as special needs, making them the largest single minority in this country. The majority of federal and state benefits available to help persons with disabilities are needs-based, meaning income and assets are strictly limited and can often be misinterpreted, resulting in costly mistakes.
The Risk of Disinheritance
One of the most common mistakes a parent or loved one makes is disinheriting their family member with special needs. The reason is often because the family believes other siblings will step in and take care of the disabled family member. However, this can lead to numerous problems, especially if the non-disabled sibling gets sued, divorced, or otherwise loses the money left to them.
The Importance of Proper Trust Planning
Another common mistake is failing to create a properly drafted trust to qualify the disabled family member for government benefits that can help pay for costly medical and/or living expenses. Qualifications for government benefits like Supplemental Security Income (SSI) or Medicaid dictate that the disabled individual has no more than $2,000 in assets. If your disabled loved one has assets above this threshold, they will have to be “spent down” to qualify for government assistance or otherwise protected in a properly drafted trust.
Avoiding Unintended Consequences
Well-meaning friends and extended family may not understand the complexity of disability benefits and give a disabled loved one money or assets that would disqualify them for state and federal benefits. It is especially difficult if the disabled person already has benefits and becomes disqualified because the “needs based” review discovered additional funding putting them over the $2,000 asset limit. It is best to avoid this situation as it is a big hassle to re-qualify your dependent for government assistance.
Caution with Crowdfunding
Be wary of crowdfunding sites like GoFundMe to benefit your loved one with special needs. In the absence of qualified legal planning, these donations can disqualify SSI, Medicaid, food stamps, and section 8 housing. A well-meaning fund campaign could cut the benefits of a disabled person and make their living circumstances worse than before.
Proactive Planning Solutions
What to do? Plan ahead! There are several ways to provide for your special needs dependent and stay within government guidelines for additional benefits. One of the best ways is to establish a special needs trust that has the specific purpose of supplementing federal and state assistance programs. By doing so, a disabled loved one can benefit from government programs and have additional money to supplement what those programs provide.
Navigating Financial Planning for Special Needs
An often overlooked aspect of planning for a disabled family member is the designation of a financial advisor who specializes in special needs planning. Engaging a professional with expertise in navigating the complexities of public and federal benefits can prevent common mistakes in special needs trust management. For instance, a life insurance policy can be structured to fund a third-party special needs trust, ensuring that no direct assets pass to the disabled individual that might jeopardize their eligibility for disability benefits or other government assistance. This strategy aligns with government guidelines and protects the disabled person’s access to essential public benefits while securing their long-term financial stability.
Seeking Professional Guidance
There are strict rules when it comes to creating special needs trusts for a disabled family member. There are also restrictions on what the money can be used for. We can help you determine what type of trust is best based on you and your loved one’s particular circumstances. Give us a call at 859-544-6012 at your convenience to set up a time to discuss your situation further.
