More than 40 million Americans had a disability in 2016, according to the U.S. Census Bureau. For some, physical and cognitive impairments can hinder their ability to make decisions, live independently and provide for themselves financially. While parents may be accustomed to stepping in, every family should prepare for the day they no longer are around to do so.
“The fear that we have as parents is that our loved one is going to outlive us,” says Brian N. Rubin president of the Special Needs Alliance, an organization of attorneys that specialize in disability and public benefits law. ‘Special needs’ is a term used to describe those who need extra support because of a medical, emotional or learning disability, such as Rubin’s 37-year-old son Mitchell, who has autism.
“We don't expect anybody else to do what we do for our child, so while we're still here, we want to try and have some peace of mind that everything will be OK,” Rubin says.
Here is how to achieve that goal:
Step 1: Consider the Financial Implications
“When you plan for people with disabilities, everyone's goal is the same — to provide security for their family member,” says John Nadworny, a partner with Special Needs Financial Planning, a specialty practice of Winchester, Mass.-based Shepherd Financial Partners.
Government services such as Social Security Income (SSI), Social Security Disability Insurance (SSDI) and Medicaid will provide much of that security. Families can also supplement government resources with their own funds or purchase a life insurance policy to provide income for their child after they pass away.
Creating a financial plan also means making sure the parents have enough for retirement, says Michael Berry, head of the Advanced Planning Team for Voya Financial in Des Moines. “It's really important to do a complete life plan for not only for the individual (with special needs), but also for the advocate,” Berry says.
Step 2: Put Legal Protections in Place
Many government services have income and asset limitations. For example, to qualify for SSI, you must have less than $2,000 in assets. A child who is left an inheritance or designated the beneficiary of a life insurance policy may inadvertently be disqualified from receiving benefits, says Jay Robert, a New York-based attorney with Kassoff, Robert & Lerner, who specializes in special needs planning.
Depending on the state, that could cost the adult child hundreds of thousands of dollars a year, says Benjamin Rubin, an attorney and Mitchell’s brother. “This is an astronomical sum that most families cannot afford for the rest of that child's lifetime,” Benjamin says. The Rubins estimate that Mitchell receives approximately $90,000 per year for such services as his day program, job coaches and housing.
A special needs, or supplemental needs, trust is a legal vehicle that will hold the assets of a person with disabilities without costing them their government benefits. “Those trusts will essentially protect any assets held for the benefit of the children,” Robert says.
There are two types of special needs trusts — first-party and third-party trusts. First-party trusts have a payback provision, meaning that when the beneficiary dies, any money left in the trust will first be used to repay the states that paid out benefits on their behalf. With third-party trusts, any money left in the trust could pass back to family members.
Another financial vehicle is an ABLE Account, a tax-advantaged savings account that lets you save up to $100,000 without losing government benefits. Like first-party trusts, ABLE accounts have a payback provision.
Step 3: Gather Your Support Team
Identify those who will support your loved one after you’re gone. For example, a guardian would have the legal ability to make decisions for the adult child if he or she is unable to do so, while a trustee would oversee the special needs trust.
Involve the person with disabilities in the planning process if possible. “A lot of people with mental health concerns absolutely can say who they want and who they don't want involved in their lives,” says Cynthia R. Haddad, a partner with Special Needs Financial Planning.
Create a letter of intent that will let people know what you want to happen once you are gone. This detailed set of instructions should include everything from an overview of the benefits the child receives to who you want — or don’t want — playing a role in your child’s life.
“The goal in the advocacy community is for every individual with disabilities to live a full life in a community,” Benjamin says. With the right financial resources and legal protections in place, an adult with special needs can thrive.
Experts recommend working with professionals who specialize in special needs planning. Here are some organizations that can help you find the professional help that you need.
- National Academy of Elder Law Attorneys (www.naela.org)
- Academy of Special Needs Planners (www.specialneedsanswers.com)
- Special Needs Alliance (www.specialneedsalliance.org)
- The Arc (www.thearc.org)