When you have a child with special needs, you think beyond your own life span. Central to this is considering what kind of life you wish your special-needs child to have should you not be there to care for and support them. For simplicity, we have categorized the myriad of planning concerns into 4 foundational pillars of your plan. These pillars are Lifestyle, Financial Security, Legal and Government Benefits. None of these categories are mutually exclusive, they all affect and in some cases depend on one or more of the others. Coordinating these pillars are essential for effective planning. For parents of special needs children, many times what you do every day has become a way of life. As a result, it’s not always easy or obvious to consider that you would need a “special” plan for your child’s finances. To you, they are just your beloved son or daughter.
But what people eventually realize is that as the parent or caregiver of an individual with special needs, you have complicated and often conflicting financial goals. As a result many questions arise:
The task of allocating personal resources in a way that enables you to achieve your financial personal goals and the care for your love one requires an integrated plan. A team approach utilizing the expertise of attorneys, accountants, a qualified advisor, as well as medical professionals and social workers can help ensure that your plan is uniquely fitted towards your family’s needs.
In working with your qualified professionals, consider the four planning pillars explained below:
When thinking about our children every parent wants to ensure that their child will be taken care of especially if they have passed on. As a special needs parent one has to consider issues and concerns prior to 18 and those beyond 18. Prior to 18 concerns include family and support, emotional concerns, education and therapy concerns. In the event of a death of a parent (caregiver) the goals becomes how to maintain the care and lifestyle of my child. One very effective tool to address these concerns is a Letter of Intent. A Letter of Intent can address everything from current lifestyle, expected changes to future wishes, living arrangements, education, therapies, etc. Some of these same issues continue past the age of majority (18 in most states) depending on the needs of the child.
The preparation of a comprehensive plan will help to provide for the special needs individual without sacrificing other family members, including yourself. You will likely need to address college funding, retirement planning, handling inheritances and potentially funding a Special Needs Trust. If there are no assets or not enough assets set aside for the loved one, he or she will depend on public benefits. These benefits rarely provide sufficient care. The objective is to provide quality of life without causing a loss or reduction in government benefits.
If someone dies or becomes incapacitated without sufficient or proper planning his or her estate may be managed under the rules of the state’s probate court. The state probate code (generally) does not consider whether a loved one has special needs. This may result in the loss of government benefits. To ensure that your child receives an inheritance without jeopardizing government benefits you may need to develop what’s known as a Special Needs Trust.
The trust should allow them to remain qualified for certain government benefits such as Supplemental Security Income (SSI) which could be lost if additional income is received and not placed in a Special Needs Trust. Funding of a special needs trust is best handled through the guidance of a qualified financial advisor. The advisor’s function is to see what resources are available and then allocate them, so that the future funding of the trust will be realistic. The advisor will do a financial analysis on future supplementary items and will then look at the resources available to fund the trust now and in the future. Resources can include:
- Government Benefits
- Family Assistance
- Savings and Investments
- Life Insurance
Government agencies recognize Special Needs Trust, however, they have imposed rules and regulations upon them. Because of this, it is critical that you consult with an experienced attorney should you choose this option.
If something happens to you and your child is still a minor or if they are an adult but cannot function as one in some capacity. (i.e. handling financial affairs or medical decisions), someone must be named to provide for his/her or her well being. In either case you may want to prepare for Guardianship and Conservatorship.
If under the age of 18, eligibility for government benefits such as Social Security income, Medicaid (or its companion in-state programs) is based on the family’s income and assets. Once 18, benefits are based on the child’s income and assets, even if he/she is living in your home. If assets are not properly structured, government benefits may be lost and/or personal assets may be depleted.
Supplemental Security Income (SSI) payments for Children with disabilities*
SSI makes monthly payments to people with low income and limited resources who are 65 or older, or blind or disabled. Your child younger than age 18 can qualify if he or she meets Social Security’s definition of disability for children, and if his or her income and resources fall within the eligibility limits. The amount of the SSI payment is different from one state to another because some states add to the SSI payment. Your local Social Security office can tell you more about your state’s total SSI payment.
SSI rules about disability
Your child must meet all of the following requirements to be considered disabled and therefore eligible for SSI:
The child must not be working and earning more than $1,070 a month in 2014. (This earnings amount usually changes every year.) If he or she is working and earning that much money, they will find that your child is not disabled.
The child must have a physical or mental condition, or a combination of conditions, that results in “marked and severe functional limitations.” This means that the condition(s) must very seriously limit your child’s activities.
The child’s condition(s) must have been disabling, or be expected to be disabling, for at least 12 months; or must be expected to result in death.
If your child’s condition(s) results in “marked and severe functional limitations” for at least 12 continuous months, they will find that your child is disabled. But if it does not result in those limitations, or does not result in those limitations for at least 12 months, they will find that your child is not disabled.
They may make immediate SSI payments to your child
It can take three to five months for the state agency to decide if your child is disabled. However, for some medical conditions, they make SSI payments right away and for up to six months while the state agency decides if your child is disabled.
Following are some that may qualify:
- HIV infection;
- Total blindness;
- Total deafness;
- Cerebral palsy;
- Down syndrome;
- Muscular dystrophy;
- Severe intellectual disorder (child age 7 or older); and
- Birth weight below 2 pounds, 10 ounces.
If your child has one of the qualifying conditions, he or she will get SSI payments right away. However, the state agency may finally decide that your child’s disability is not severe enough for SSI. If that happens, you will not have to pay back the SSI payments that your child got.
What happens when your child turns age 18
For disability purposes in the SSI program, a child becomes an adult at age 18, and they use different medical and nonmedical rules when deciding if an adult can get SSI disability payments. For example, they do not count the income and resources of family members when deciding whether an adult meets the financial limits for SSI. They count only the adult’s income and resources. They also use the disability rules for adults when deciding whether an adult is disabled.
If your child was not eligible for SSI before his or her 18th birthday because you and your spouse had too much income or resources, he or she may become eligible for SSI at age 18.
Social Security Disability Insurance (SSDI) benefits for adults disabled since childhood
The SSDI program pays benefits to adults who have a disability that began before they became 22 years old. They consider this SSDI benefit as a “child’s” benefit because it is paid on a parent’s Social Security earnings record.
For a disabled adult to become entitled to this “child” benefit, one of his or her parents:
- Must be receiving Social Security retirement or disability benefits; or
- Must have died and have worked long enough under Social Security.
These benefits also are payable to an adult who received dependents benefits on a parent’s Social Security earnings record prior to age 18, if he or she is disabled at age 18. They make the disability decision using the disability rules for adults. SSDI disabled adult “child” benefits continue as long as the individual remains disabled. Your child does not need to have worked to get these benefits
What is Medicaid?
Medicaid is a jointly funded, Federal-State health insurance program for low-income and needy people. It covers children, the aged, blind, and/or disabled and other people who are eligible to receive federally assisted income maintenance payments.
*This is partial information taken from the Social Security publication “Benefits for Children with Disabilities”. Visit www.socialsecurity.gov for the full publication.
Thirty-two states and the District of Columbia provide Medicaid eligibility to people eligible for Supplemental Security Income (SSI ) benefits. In these States, the SSI application is also the Medicaid application. Medicaid eligibility starts the same months as SSI eligibility.
The following jurisdictions use the same rules to decide eligibility for Medicaid as SSA uses for SSI, but require the filing of a separate application: Alaska, Idaho, Kansas, Nebraska, Nevada, Oregon, Utah, Northern Mariana Islands.
The following States use their own eligibility rules for Medicaid, which are different from SSA`s SSI rules. In these States a separate application for Medicaid must be filed: Connecticut, Hawaii, Illinois, Indiana, Minnesota, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma, Virginia.
What happens to Medicaid coverage if a SSI recipient works?
If a recipient`s State provides Medicaid to people on SSI, the recipient will continue to be eligible for Medicaid. Please refer to the general Work Incentives section for more information about SSI work incentives. Medicaid coverage can continue even it a recipient`s earnings along with other income become too high for a SSI cash payment.
How does a recipient qualify?
To qualify a recipient must:
- Have been eligible for an SSI cash payment for at least one month;
- Still be disabled;
- Still meet all other eligibility rules, including the resources test;
- Need Medicaid in order to work; and
- Have gross earned income that is insufficient to replace SSI, Medicaid, and any publicly funded attendant care.
As you can see there are many options and concerns when addressing the emotional, relational and particularly financial needs of your special needs child. Consult your qualified financial advisor to address these concerns and put together a plan that works for you and your family.
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered through Trilogy Capital, Inc., a Registered Investment Adviser. Trilogy Financial Services, Trilogy Capital, Inc. and NPC are separate and unrelated companies.