Planning for your loved one ensures their financial security and quality of life. Here are the three main aspects of planning; understanding financial and medical benefits, brainstorming your estate plan, and utilizing Special Needs Trusts.

1. Understanding Financial and Medical Benefits

Public financial benefits include Supplemental Security Income Benefits (SSI) and Social Security Disability Insurance (SSDI). While both serve the same purpose, they each have difference limitations and funds.

The SSI program is means tested and pays for basic living expenses of those who are 65 or older, blind or disabled, or children with disabilities. SSI functions as a program that is intended for people with financial need, thus a work requirement is not necessary. SSDI is an earned benefit; those who qualify pay into Social Security via work credits earned by themselves or their parents. While there is a limit on assets to qualify for SSI, SSDI has no limit on assets to qualify.

Public medical benefits include Medi-Cal, Medicare, and coverage provided by the Affordable Care Act.

Medi-Cal is received automatically with SSI and covers hospilization, which can also include in-home services such as personal care, housekeeping, cooking, and transportation to donors. Medicare, on the other hand, is received after two years of SSDI and covers general medical needs, including doctors, hospitals, and skilled care. To be eligible, you must be 65 and older, younger than 65 and have a qualifying disability, or have a diagnosis of end-stage renal disease or amyotrophic lateral sclerosis.

While not a public medical benefit plan, the ABLE Act is eligible for citizens who were disabled before 26. To qualify for an Able Account, your loved one must be SSI qualified or have a medically certified disability. Under the ABLE Act, income and withdrawals are non-taxable, and cash contributions aggregated $15,000 per year can be made by any number of persons. The ABLE Act also allows your loved one to accumulate savings in their ABLE Account while remaining eligible for SSI. In brief, the first $100,000 in the account is excluded from the SSI $2000 individual resource limit, however, once the account exceeds the $100,000 peak, the SSI cash benefit is suspended until the account falls back under $100,000. ABLE account expenditures (Qualified Disability Expenses) are “Expenses related to the blindness or disability of the designated beneficiary and for the benefit of the designated beneficiary.” (This may include, but is not limited to, housing, health, and legal fees). This account can be set up by the disabled individual, a legal guardian, or an agent on a power of attorney. So long as the disability is present prior to age 26, the individual canqualify for an ABLE Act Account at any time.

2. Thinking about the Future of Your Loved One

The key to a thorough estate plan is the pre-planning:brainstorm the expectations you have for you and your child, develop a plan and implement it.

Here is a good list for brainstorming:

  • Medical and personal needs
  • Medical and personal wishes
  • Roles of family members, trustees, caregivers, etc.

Estimation of income and expenses:

  • Monthly income (SSI, SSDI, Social Security, earned/unearned income)
  • Monthly living expenses (housing, food, transportation, medical, recreation,etc).
  • Possible financial safety nets

In any case, a special needs trust is a key part of an estate plan for families with loved ones with special needs.

3. Utilizing Special Needs Trusts

Special Needs Trust (hereafter SNT) maintains your loved one’s eligibility for public benefits. A third-party SNT can be established by parents through their wills or living trusts. The trustee owns and is responsible for managing assets in the trust, rather than the child, so that the child may continue to receive government assistance and outside contributions. The trustee may be a family member or friend with or without a professional co-trustee, a corporate or other professional trustee, or a successor trustee. Generally, there are two types of third-party SNTs. A Testamentary SNT is established at the death of the person establishing the SNT pursuant to his or her trust or will, and a Stand-Alone SNT is established while the benefactor is still alive. Compared to a Testamentary SNT, a Stand-Alone SNT has many benefits:

1. Stand-Alone SNTs may receive assets from multiple people during the lives of the parents. This gets rid of the need for a family members to create thier own SNTs for the benefit of the loved one with special needs. Testamentary SNTs on the other hand are created within the broader scope of a revocable living trust and do not come into existence until the death of the parent(s).

2. The person with special needs, through the trustee, can immediately access the assets transferred to the Stand-Alone SNT.

If an individual with special needs receives assets, a first-party SNT may be required. The first-party SNT prevents disqualification from public benefits. Assets in a first-party SNT can be used for the “sole benefit” of the beneficiary and are subject to Medi-Cal reimbursement at the death of the individual with special needs.

Should you have any questions or would like to learn more, please feel free to consult with one of our attorneys at McDowall Cotter or give us a call at 650-572-7933. We specialize in civil litigation, business services, and estate planning and are located in San Mateo. Our experienced and knowledgeable staff will be able to help you with any of your needs or concerns.

-Florence Ye