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Planning For A Loved One With Special Needs
- 1. Planning for a Loved One With Special Needs Todd Whatley, CELA Collier Moore, J.D., LL.M. Taxation 4700 S. Thompson, C-103, Springdale, AR 72764 479-750-1101
- 4. Part 1: Understanding Public Benefits
- 10. How Benefits Work Together SSI Medicaid SSDI Medicare
- 11. Part 2: Making Decisions About the Future
- 15. Part 3: Creating an Effective Plan for Your Child
Notas del editor
- To qualify for SSI, an individual must meet the Social Security Administration’s definition of “disabled” and have limited assets and income. SSI can be impacted as follows: It is reduced, dollar for dollar, if the individual has more than $____ in unearned monthly income, such as gifts, interest or rent. It is reduced by one dollar for every two dollars earned if the individual has earned income (wages) above $_____ a month. It is reduced by one third if the individual receives in-kind support and maintenance (i.e., food and shelter). For eligible individuals, SSI pays up to $___ a month for food and shelter.
- A growing number of parents over age 65 are caring for adult children with special needs. As parents retire, become disabled or die, their children become eligible to receive their Social Security benefits as follows: If a parent who is eligible for Social Security is retired or disabled, the child receives an amount equal to ½ of the parent’s benefit. If a parent who was eligible for Social Security dies, the child receives an amount equal to ¾ of what the parent was receiving or would have received at retirement. If a child is receiving SSI, it can be reduced, dollar for dollar, by Social Security. A large Social Security benefit can even disqualify the child for SSI, triggering the loss of Medicaid. The child then must reapply for Medicaid separately. A special needs attorney can help you plan ahead for this type of situation.
- Government decides amount of in-home support offered to Medicaid recipients. In-home support can include paramedical services.
- [Note to speaker: replace “autism” with relevant condition based on audience.] Once families understand the role of public benefits, they can make decisions about their children’s future. Planning ahead is critical to preserving a child’s quality of life. Let’s consider Nathan…. While Nathan’s mom is alive and able-bodied, Nathan will continue to live at home and mom will make his medical and financial decisions. Nathan receives Social Security because his dad was eligible for benefits before he died. Nathan’s mom is not currently eligible for Social Security.
- What will happen to Nathan? After Nathan’s mom dies, his SSI will increase but his resources will not be sufficient to preserve his quality of life. Nathan will need someone to make his medical and financial decisions. He also will need a place to live if he is unable to stay in the family home. And he will need a way to pay for medical expenses.
- What plan of action could Nathan’s mom make to protect him after her death? No plans: If Nathan inherits assets under mom’s will, he will be disqualified from SSI and be forced to live on the inheritance and income from Social Security and work programs. When the inheritance is gone, Nathan will qualify for SSI again but have no supplemental income to preserve quality of life. Disinherited: If mom leaves all assets to Nathan’s sister with the understanding that she will care for Nathan, he will remain eligible for SSI but could become destitute if the sister cannot or will not comply with the mom’s request. Non-SNT Trust: If Nathan’s mom creates a trust that is not an SNT, income and principal will be counted as his assets and he will lose SSI. Third-Party SNT: If Nathan’s mom establishes a third-party SNT, Nathan will keep SSI and benefit from supplemental funds, which the trustee will distribute. The trust can be structured to help ensure the involvement of people important to Nathan. [optional:] The trust also may require and provide money for periodic monitoring of Nathan’s caregivers. At Nathan’s death, there will be no “payback” to Medicaid. First-Party SNT: If Nathan has his own assets, his mom can establish a first-party SNT. This works in the same way as the third-party SNT except that, at Nathan’s death, any funds remaining in the trust are subject to a Medicaid payback.
- As we’ve seen from Nathan’s situation, planning can make the difference between just getting by and enjoying a higher quality of life. The first step is considering how you – and your child – envision the future. [Additional point] What unforeseen challenges could arise, such as medical complications?
- The next step is writing it all down. The Memorandum of Intent should include ample information to help anyone involved in your child’s future care understand the child’s unique personality, strengths, challenges, needs, etc. It also should provide details about all aspects of the child’s lifestyle, including medical and rehabilitation needs, recreational activities, educational expectations and work goals. For example, under “Residential Directions,” the document may state that the child will one day own a home or that a live-in caregiver will be given rent-free accommodations in the home. The Memorandum of Intent is not a legally binding document. But, because it can contain information not appropriate for SNT documentation, it can enhance the trustee’s understanding of the child’s situation and needs.
- Once you’ve described your child’s desired lifestyle, you’ll need to determine what it will cost and whether he or she will have adequate resources. When estimating your child’s future income, consider whether you will be receiving Social Security benefits and/or whether your child will qualify for SSI, have earned income from employment, or have unearned income, such as from investment returns. When considering monthly expenses, list costs for items under such categories as: Housing Care assistance Personal needs Education Transportation Medical/dental Food Social/recreational Your child’s expenses may exceed his or her income. If so, the shortfall represents the minimum amount that should be set aside in an SNT.
- An SNT offers a good way to preserve public benefits while providing the supplemental funds needed for a higher quality of life. Assets in the SNT do not disqualify the beneficiary from public benefits because they are owned by the trust. The trustee distributes assets for the benefit of the beneficiary according to strict guidelines. In Nathan’s case, the parents might have funded the SNT with life insurance and left the assets accumulated over their lifetime to their daughter. This would have allowed them to preserve Nathan’s quality of life by maximizing public and private resources, while still meeting other important estate planning goals and preserving harmony between brother and sister. An SNT also can be tailored to meet individual situations, such as the need for an advocate, care manager or conservator.
- Once parents decide to establish an SNT, they should carefully consider who will assume the role of trustee. The trustee’s responsibilities are complex and errors can result in the child losing public benefits. Whether the trustee is a family member, attorney or corporation, it is important to name a successor trustee. Some families also set up a Trust Advisory Panel, which allows members (parents and siblings, advocates. others) to weigh in on important decisions regarding the trust. Additionally, the trustee may be directed to or choose to involve others in the execution of duties. For example, the trustee may hire an investment manager or be directed by the trust to retain an advocate or care manager who will oversee the personal needs of the beneficiary.
- If there is an SNT in place, anyone wishing to bequest assets from a retirement plan, insurance policy, etc. should be told to name the SNT, rather than the child, as beneficiary. Parents with more than one child who wish to pass assets equitably can provide for the child with special needs by funding the SNT with life insurance. Funding an irrevocable SNT removes the transferred assets from the parent’s taxable estate.
- If the individual with special needs is competent, at legal age, he or she should put in place critical estate-planning documents, including a will, advance directive and medical power of attorney. If the individual is not competent, a parent or other individual can be named as guardian or, in extreme cases, conservator of both the individual and the estate. Parents must be named as guardians to continue making legal decisions for a child who has attained legal age. The role of guardian or conservator can be challenging when an individual is developmentally disabled and/or mentally ill.
- Pooled trusts, established by disability organizations, provide an alternative for families with limited assets.