Planning Ahead for Special Needs
Planning for family members with special needs can be overwhelming, especially when so many decisions may have lifelong consequences. Not only must parents untangle the intricacies associated with government programs, but they must also understand guardianships, legal documents and the like. Below are some tips for families beginning to plan for individuals with special needs:
- Getting Started. When you need to budget for another person, saving for retirement becomes even more difficult. You may need to take precautions that money set aside for your child will not be consumed by long-term care expenses for you or a spouse. Many families supplement what Medicaid provides by putting money into a special needs trust, and those funds can be used to help pay for the individual’s expenses without jeopardizing government benefits.
- Utilize New Tools. The ABLE or 529A account, is a tax-advantaged savings vehicle that make it much less costly to create a special needs trust. These accounts are likely to be attractive for disabled people who work and want to save more than $2,000, or for families who need a place to deposit gifts or inheritances from family members. Once the account exceeds $100,000, the individual’s benefits will be cut off, although Medicaid is not affected.
- Trusts. While there are several types of special-needs trusts, “third party” trusts are frequently used by families who want to supplement what the disabled person receives through government-run programs. The trusts can sit for years, families can add money over time, or they can fund them with life insurance and estate proceeds. Pooled trusts are also an option for families with less money or little family to help oversee the process.
- Guardians. Families struggle when it comes to considering whom to appoint as a guardian to look after their child, as well as who will serve as a trustee to oversee any trust accounts. Some experts suggest splitting roles to build in a system of checks and balances: Have a guardian who will advocate for the individual, and a separate trustee to handle the money.
See Tara Siegel Bernard, Tips for the Future Care of Disabled Family Members, The New York Times, March 27, 2015.
Special thanks to Matthew Bogin (Bogin Law) for bringing this article to my attention.
