Tag Archive | SSI

Health insurance after 26: Got it!

One of the more popular posts on the Cinder Cone has been this one about health insurance for young people with disabilities. As the debates about health insurance swirled around Washington this year I wondered whether I’d need to “repeal and replace” the post’s content with whatever scenario emerged from that mess. At this writing, no change is needed.

In related news, we were able to keep Nathan on my medical, dental, and vision insurance after he turned 26 this year. Because a couple of surprises occurred along the way, our story is worth sharing here as a cautionary tale.

Nathan had been on my husband’s insurance from infancy. But when I started working for a large employer last year, it made sense to move Nathan from his dad’s insurance (through a very small business) to my insurance.

Last fall, while Nathan was still 25, I filed the forms to add him to my coverage.

His eligibility was verified by a third party, not by the insurance companies. I provided a scan of his birth certificate, and also had the option of submitting paperwork to prove that he has an ongoing disability.

It was my understanding that filing the proof of disability at the time of enrollment would lead to smooth sailing when Nathan turned 26 several months later. They’d already know he was disabled. No further hassle.

Since earlier in the year we had received the letter from Social Security stating that Nathan was eligible to continue receiving SSI payments, I scanned and uploaded that sucker! What better proof of disability?

A few weeks later, the third party agreed that Nathan was my son. He was added to my medical, dental, and vision coverage. Yay.

Three months prior to Nathan’s birthday this year, imagine my surprise to receive a letter from my dental insurer. It pretty much said, Hey, your son is turning 26 soon, and we’ll drop him unless you can submit “a letter from a medical provider verifying that your dependent is disabled.” Have a nice day.

I was perturbed for two reasons.

First, I thought I’d already covered this with the SSI letter at the time of enrollment.

Second, Nathan no longer has a medical provider familiar with his diagnosis. It’d been years since he’d seen a psychiatrist (= physician). And he’d stopped going to a psychologist (= not a physician) in 2015.

I told the health care facilitator (HCF) for my employer about this puzzling turn of events.

She couldn’t really respond about the third party verification issue, but affirmed that I’d have to come up with the requested documentation now.

But, she added that although I’d received a letter from the dental insurer, I should file proof of disability with the medical insurance provider. If they accepted that Nathan is disabled, the dental and vision insurers would follow suit.

She emailed me the disabled dependent certification form I’d need to submit to my medical carrier.

It was only one page (hooray) but the key section was “to be completed by attending physician.” Dang.

I explained our no-physician situation to the HCF, who checked with the medical carrier. She found out that “if the main provider diagnosing your son is a psychologist, that provider can complete the certification form.”

Yay. I’d had a good rapport with Nathan’s last psychologist, so I didn’t feel too awkward asking him to fill out the form.

I left a voicemail. Two weeks went by with no response. Had he retired, and neglected to shut off the “You have reached the voicemail of Dr. K____. If this is a life-threatening emergency, please hang up and dial 911” message?

I left another voicemail. Another week went by before Dr K called back.

He’d be happy to fill out the paperwork; “I’d do anything for Nathan,” he emphasized. He recapped for several minutes how much he’d enjoyed their sessions, and why he felt Nathan was unlikely to ever hold a job for long. I thanked him profusely, and that night sent him the certification form with a self-addressed stamped envelope.

Two weeks went by. I left another voicemail.

Finally, the sought-after envelope showed up in our mail a week later. Retaining a copy, I sent the filled-out form to the HCF via interoffice mail, and she sent it to my medical insurer.

A few weeks went by, until she emailed: my insurer had accepted Nathan as a disabled dependent. He would continue to be covered.

End of story? Not quite.

I had to contact the HCF one more time a few weeks later, because we’d received another pleasant letter from my dental plan. It was a repeat of the initial letter, except now it noted that Nathan’s 26th birthday was a month away. Had the dental and vision plans gotten word of the medical plan’s decision?

In response, the HCF updated my records in the system to show that Nathan was an approved disabled dependent. That information would be transmitted electronically to my dental and vision carriers.

The whole process was now finished, three weeks before Nathan’s birthday. Whew!

And everything has been fine.

I sent a note to Dr K and an email to the HCF, thanking them for their efforts that resulted in our family’s peace of mind.

Here are a few lessons learned from this mini-saga:

Disability documentation provided to a benefits eligibility verification outfit doesn’t mean that the insurers themselves will automatically be on board.

It doesn’t hurt to clarify the terms used on a disabled dependent certification form. I would have been scrambling even more if I’d assumed we truly needed input from a physician. However, I’m not sure all health plans will include psychologists or counselors under their umbrella of “medical provider.” Best to verify such things early on.

Don’t delay in taking action! I started doing stuff three months before Nathan’s birthday, but as you saw, we only got things finalized with a few weeks to spare. Two months prior to his birthday, my medical carrier had also sent me a letter about my dependent turning 26. Since it ended up taking 2 1/2 months to get everything in place, I’m glad the dental carrier’s letter had arrived at three months prior.

Have you been through disabled dependent certification for your neurodiverse 26-year-old? What was the outcome? Let us know!

 

 

 

 

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SSI Continuing Disability Review: our experience

Have you read the post from 2013 titled “When SSI benefits might be terminated“? Not surprising if you haven’t – it hasn’t gotten many views. Heck, I scarcely remembered it, and I wrote the dang thing! But this year I sure reread it a few times after the Social Security Administration (SSA) put Nathan’s case under review.

The old post was written from research and talked in generalities. Which is fine, but it lacked the details of a first-person account. Now, you’ll get to read what happened at each step in the Continuing Disability Review for Nathan’s SSI.

For the last few years we’d been sailing along without much interaction with SSA. In early December a notice would come about the increase in SSI benefits (or not) in the upcoming year. In the spring of every year I’d file the requested Representative Payee Report.

In mid-January this year, out of the blue (unless it was because Nathan had been receiving SSI benefits for exactly five years), we got a Notice of Continuing Disability Review. The letter gave an appointment date and time in mid-February to come in and discuss Nathan’s situation: his health, ability to work, work history, medications, and treatment history in the previous 12 months. The meeting wasn’t going to be at the SSA office where Nathan’s SSI case manager works; a contact person was not specified.

We also received a 13-page form, titled “Continuing Disability Review Report.” Luckily, several parts didn’t apply to Nathan, so the task of completing it wasn’t as daunting as it first appeared. If the SSI recipient isn’t capable of filling out the form, someone who knows the recipient well is allowed to do so. In our case, I filled it out on Nathan’s behalf.

The notice suggested that I telephone soon if I had a conflict. Not responding and not showing up could trigger a loss of benefits. The notice didn’t say whether Nathan himself had to go to the appointment. I opted to go without him.

Report in hand and rehearsing my arguments for keeping the benefits coming, I arrived at the SSA office ten minutes before the appointment – and saw a long, barely-moving line outside the door. No way I’d be sitting inside at the designated time!

When I mentioned this to others at the end of the line, one of them was sure that people with an appointment could bypass the line. Yes!

Even after jumping to the front, I had to get through the metal detector and purse search (where the youthful security guard made fun of my old-school iPod) and then stand in a long line just to get to the check-in kiosk.

Although I finally sat down in the waiting area several minutes after the scheduled time, I needn’t have worried: it was another hour before I was called to a desk.

The gal flipped through the report and said, “Normally, I’d have you answer follow-up questions while I input the information on this form. But since we’re so backlogged today, I’ll just take the report and input it later. Thanks for coming in.”

All that waiting just to submit a document! Would it be enough to convince them?

No. A few weeks later Nathan received a packet from the California Dept. of Social Services. SSA had forwarded the claim to them for review, and they had decided more information was needed.

The packet was sent and addressed only to Nathan, and contained an eight-page “Function Report – Adult – Third Party,” to be submitted in ten days. The cover letter included the following paragraph:

“When we evaluate a claim for disability, we must determine how the claimant’s impairment(s) affects his/her ability to function in normal daily activities. Your name was provided by the claimant as a source of this type of information. Therefore, your assistance in completing the enclosed daily activities form is requested.”

But … wasn’t Nathan the claimant? How could he complete a third-party report when he is the first party?

I called the analyst who sent the packet for clarification. She cheerfully explained that Nathan was supposed to give the report to someone who knows him well.

“So … that could be me?” I asked.

“Oh, absolutely!” she replied. “We’d prefer that, actually. You probably know him better than anyone.”

“Okaaay,” I said, wondering why they hadn’t sent it to me in the first place! Or why the letter didn’t tell the recipient to give the form to someone else.

Almost all sections of this form consisted of multipart essay questions. Topics include: the claimant’s mental/physical condition, daily activities, personal care, meals, house and yard work, getting around, shopping, money, hobbies and interests, social activities, and general abilities.

Remembering the advice we’d heard when submitting/appealing Nathan’s SSI application – “bombard them with documentation!” – I gave detailed answers to every question, using the “Remarks” section to complete earlier answers where I’d run out of room. It took several hours over several days to finish.

“This better be enough to convince them!” I thought as I faxed the report on Day 10.

It wasn’t. In mid-April Nathan received a notice that he needed to be examined by a mental health professional chosen by the Dept. of Social Services.

The appointment, at no cost to us, was scheduled for mid-May. Again, failure to show up might result in SSI benefits being terminated. Nathan had to sign and mail or fax a short form confirming the appointment and authorizing the results to be shared with his doctor.

By this time, Nathan was getting concerned that his benefits might be cut off. Although his willingness to try employment has improved, none of us believe he could tolerate working enough hours to support himself. His depression, ADHD, and Aspergers and/or Schizoid Personality Disorder still present large obstacles to holding a job.

On the day of the appointment, Nathan mentioned that his mind was foggy. We got there a few minutes early, and he was given a form to fill out.

He’s never been speedy at writing answers to questions, but on this day he labored over each word. “How do you spell ‘suicidal depression’?”  “Who was my last doctor?” And so forth.

He was called back before finishing. The exam only took ten minutes; then he came back out to the waiting room and slowly completed the rest of the form. Afterwards, Nathan lamented that he hadn’t explained himself clearly to the examiner. “I just couldn’t come up with the right words. I think I blew it.”

Silently, I reflected that not expressing himself well may have helped the cause.

In the days and weeks that followed we braced for the decision, or for the next request for information. Reviewing the 2013 blog post, I saw that SSI benefits are hardly ever terminated due to the recipient no longer qualifying as “disabled.” Was this still true?

The letter came to Nathan in mid-June, stating that “…you will continue to receive Supplemental Security Income payments if you still meet all the other eligibility requirements. This is because you are still disabled under our rules.”

Whew!

The letter also included this paragraph:

“The doctors and other trained staff who decided that you are still disabled believe that your health may improve. Therefore, we will review your case again in about 3 years. We will send you a letter before we start the review.”

What can other atypical young adults on SSI take away from our experience?

  • The likelihood of the case being reviewed might increase at the five-year mark.
  • The SSA and its cooperating agencies may be more persistent in their review than you anticipate.
  • The review process can take months from start to finish.
  • When information is requested, do not be a slacker!

 

 

Special needs trusts – Part 5: What goes in and how it can be spent

Now that Parts 1-4 have covered most of the issues involved in creating a special needs trust (SNT), it’s time to talk about putting assets into the trust and how the money can be spent. This is in fact the whole point of having a trust, right?

If you’re having an attorney prepare your trust, s/he will need to know about your financial assets, especially if you’re also creating or updating wills or living trusts along with the SNT. It will help to provide at least a summary list of your major assets and accounts with a ballpark figure on their value. (Some attorneys ask for account ID numbers too; ours didn’t.) From this, the attorney might suggest which of your assets could be designated for the SNT.

As discussed in Part 3, anybody except the beneficiary can fund a third-party trust (the most common type of SNT). Parents, relatives, and others can contribute cash, investment funds, real estate, or other assets. The SNT can be the beneficiary of life insurance policies and the like. The trust can also inherit all or part of the estate of the parents or anybody else.

One attorney said the ideal is for  special needs trust to contain $80,000 to $150,000 once both parents have passed away. This large sum will be used for a lifetime of expenses other than food or shelter (more about that later).

Our family doesn’t have that kind of money sitting around right now, but we have arranged for Nathan’s SNT to inherit half of our estate (the other half going to his brother). In the meantime, we are chunking a little money here and there into the SNT account. The idea is to give the trustee at least some funds she can work with right away after our death, knowing that it may take some time for the inheritance to wend its way through the legal processes and into the SNT.

Not long after the SNT documents are signed, you should set up an account that will hold the funds in the trust. When you’re ready to do this, bring the trust documents to your financial institution and be prepared to sit with someone at a desk for awhile. You’ll have to deposit at least a nominal sum into the account at that time.

Now, on to the particulars of how funds can be withdrawn from the trust and what they can be used for. Here are two important points:

  1. To keep the SSI benefits flowing, the special needs trust funds shouldn’t be used for food or shelter – that’s what the SSI funds are supposed to cover. If some trust fund money does go toward a landlord, utilities like electricity/gas/water, groceries, or a restaurant, Social Security can reduce SSI benefits by up to one-third.
  2. The trustee won’t be able to withdraw cash for the beneficiary to spend, because that is counted as “income” by the good folks at SSA. No; the trustee will have to withdraw the funds and purchase the goods or services, which are then provided to the beneficiary. (And you can’t give the beneficiary gift cards, either!)

Follow this link or this one (or both) to read more about the rules regarding the use of SNT funds.

What if you want to purchase a permanent home for your son or daughter: can the trust be used to do that? The answer is, it’s complicated. You or the trustee should definitely consult with an attorney before going too far with that idea. This link sheds a little more light on the considerations involved.

Pretty much anything other than food or shelter is fair game for SNT expenditures: a car or other means of transportation, clothing, medical expenses not covered by Medicaid, amusement items, training or education expenses, electronics, etc. I think I read somewhere that in the trust document you may forbid expenditures on certain specified things, such as alcohol or cigarettes.

Speaking of decisions regarding the funds in the SNT, when devising the trust you’ll need to specify what will happen to the funds if the beneficiary dies before the trust funds are used up. If you’re still alive, the funds could get absorbed back into your estate. But if you’re gone too, do you want the money to go to your surviving offspring? To grandchildren? To the trustee? To charity?

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As you have seen, setting  up a special needs trust is a big deal, but help is available at each step in the process. Remember that the trust can, and probably should, be updated over time. This article gives a very helpful breakdown of which aspects to review. You should review the trust annually, and whenever there’s a change in circumstances that impact the key players or the funding.

Believe it or not, I think these five special needs trust posts have now covered the basics. But don’t be too sad about the end of the SNT series! The topic may come back if I find another important angle to share (oh joy, oh rapture). And once the ABLE accounts are up and running, we just may have to look at how those will interact with special needs trusts.

In the meantime, best of luck as you pursue setting up a special needs trust for your son or daughter. It’s a hassle, but what better legacy could you leave than providing for your special needs family member for years to come?

 

Special needs trusts – Part 4: Choosing a trustee

One of the biggest decisions you’ll face in setting up a special needs trust (SNT) is naming who will serve as the trustee – in other words, who’ll be in charge of managing and spending money for your adult child after you no longer can. The wise grantor setting up the special needs trust (that’s you!) will consider several factors when making this important choice. Although you can wait to make the decision while the SNT documents are being prepared, giving it some thought beforehand is a good idea.

(Before reading any further, please note that if your adult child has a pooled trust, you’ll be off the hook for choosing a trustee. The nonprofit organization that maintains the pooled trust will appoint a trustee to manage the fund. Go back to Part 3 to learn more about the pros and cons of pooled trusts.)

Most of the time, families create a special needs trust that requires the selection of a trustee. It’s nice to have that control – but how do you choose?

This discussion about SNT trustees on the Nolo website is clearly presented and covers the important points. For those of you who don’t like to follow links, I’ll rephrase what the article says.

Usually, the parent(s) of the disabled child are the trustee(s) of the SNT until no longer able. Once the last parent of your adult child dies or is incapacitated, the trustee you’ve selected – the successor trustee – will have to handle these and other tasks:

  • enhance the beneficiary’s life by using the trust fund to purchase goods and services (except food or shelter)
  • make the trust fund last as long as possible. Sometimes that can mean saying “no” to a spending request.
  • manage the fund to earn dividends or interest
  • keep records
  • file reports for SSI and Medicaid
  • file taxes

Most of us will look to family members as candidates. The ideal trustee would have these attributes:

  • be willing to serve as trustee
  • be capable of performing the duties well
  • be trustworthy to act in the beneficiary’s best interest – as opposed to increasing his or her own wealth
  • be willing to follow your wishes, and to follow the laws and rules (no mavericks, please!)
  • have familiarity and empathy with the beneficiary – living nearby is a plus, too
  • be expected to live years beyond when you check out. For instance, your grandfather is probably not the greatest choice (even if he is as sharp as a tack and fit as a fiddle).

Some of us do not have an individual relative who would meet these important criteria. But, you might have two or more family members who each have some attributes that in combination would fit the bill. Happily, you’re allowed to appoint two or more c0-trustees. That can raise other issues, though: would they work well together, or argue a lot? Also, you’d have to decide whether to allow each trustee to act alone, or stipulate that all trustees must agree to every action regarding the trust.

Your attorney may ask you to name a few candidates and rank them in order of preference. That way, if your first choice dies or has a change of heart, the second person on the list will get to do the honors, and so forth. Perhaps at some later date you’ll want to scramble the order, or add or subtract a potential trustee. No problem – that can be accomplished by updating the trust documents.

If you’re not seeing a willing and able candidate among family members, an alternative is to hire a professional or corporate trustee. They may be found in institutions such as banks, savings and loans, law firms, trust companies, or brokerage houses. While such professionals know how to manage trusts, they may not have much experience with special needs individuals, and they don’t know your special needs individual. Some institutions won’t even agree to the task unless the trust fund is “large enough.” The “large enough” threshold may be on the order of $250,ooo or even $1 million.

Your attorney, special needs financial advisors, and others in the special needs community may be able to recommend professional trustees who have done well for other families.

According to this attorney, the size of the minimum annual fee charged by professional trustees makes them an expensive choice for small trust funds. She suggests pairing a professional and a family member as co-trustees for larger trust funds, and using family members or pooled trusts for smaller SNT funds.

Assuming you select a non-professional as trustee, you’ll want to give him or her as much support as possible. Other than naming a co-trustee, here are some ways to do this:

  • use a trust protector or advisor. These individuals have no legal authority over the trust but are knowledgeable about issues such as investment strategies or compliance with SSI and Medicaid rules. The trustee is advised to consult with them for guidance.
  • provide a written description of the trustee’s duties. This may be a letter included with the trust papers, a book, etc.
  • provide background information about the needs of the beneficiary. It could be a document compiled for the trustee, or maybe a copy of the special needs letter of intent you’ve created.
  • name the trustee as a remainder beneficiary of the trust property after the trust ends. While it is thoughtful to provide monetary compensation for his/her work as a trustee, consider whether this arrangement might corrupt how the trustee would manage the fund during the beneficiary’s lifetime. As Nolo puts it, “every dollar spent on the beneficiary is a dollar that the remainder beneficiary won’t receive.”

Here’s how the trustee-choosing process played out for us:

Before meeting with our attorney, we had a vague idea about whom we’d name as trustee. Since we were creating our living trust and healthcare directives at the same time as the SNT, we were shuffling lists of our relatives: “this person can be #1 for special needs trustee; that person can be #1 for my power of attorney for health care,” etc.

We ended up choosing one of Nathan’s aunts as the trustee on his special needs trust, with other aunts as the alternates. None of them live in the same town as Nathan, so there’s an issue that may need a workaround when the time comes. As our nephews and nieces mature, some of them may end up on the list as replacements.

Among our trust documents, our attorney included a ten-page letter of instructions for the trustee – in plain English, not legalese! Ten pages sounds like a lot, but it covers several “what-if’s” that may never be a factor. Better to have too much information than not enough. The documents also included a flier from a local wealth management group that has helped many trustees of SNTs in the past.

The attorney and his paralegal emphasized to us that they’ll be available to answer any questions the trustee may have.

As you can see, choosing a trustee is a challenging task. Being a special needs trustee is a challenging task too: those of us who aren’t angels would prefer taking a giant step backward when asked. Hopefully, you’ll be able to find (or hire) a person who is competent, reliable, endowed with common sense and a big heart – and who steps forward when asked.

Special needs trusts – Part 3: Which type of SNT meets your needs?

Part 1 of the Special Needs Trust series discussed what they are and why they are a good idea (to provide future financial stability for your disabled son or daughter). Part 2 of the series covered who should prepare your SNT: you, or an attorney (preferably one with SNT experience).

Here in Part 3, we’ll look at the different types of special needs trusts our lawyer friends have concocted. Yes, as if a “special needs trust” isn’t specialized enough, it turns out there are three types of special needs trust. Each has pros and cons. Since it’s good to know what the options are, especially when the subject is “your child’s future welfare,”  here’s an overview of the three types.

Third-party special needs trust (also known as a family trust). The third-party SNT is the most popular variety; it’s what our family has. The funding for a third-party trust can come from anybody – except the person who is the beneficiary.

  • Parents can put cash, investment funds, real estate, or other assets in the trust.
  • Relatives and friends can contribute too.
  • Parents or others can also make the trust the beneficiary of life insurance policies and the like.
  • The trust can be designated as an inheritor of the estate of the parents, grandparents, the nice guy down the street, etc.

Unlike the other two types of SNTs, this one allows the creators of the trust to allocate all of the money remaining in the trust after the death of the beneficiary.  Those funds can be designated for surviving siblings, grandchildren, one or more charities of your choosing – whomever and however you wish.

Third-party trusts are costly to set up (unless you do it yourself) and require either finding a family member who’s willing and competent to serve as trustee, or paying a professional at a financial institution to be the trustee. (Part 4 will look at trustees: what they need to do, and how to choose them.)

First-party special needs trust (also known as a (d)(4)(A) trust, Type A trust, or court-ordered trust). This type of trust is often set up if the disabled son or daughter has assets of his/her own in excess of $2000. Here are a few ways that might happen:

  • a relative dies and leaves an inheritance to the individual, unaware that assets above $2000 render the disabled recipient ineligible for government benefits like SSI and Medicaid.
  • the individual was able to work and save for a time before mental illness or some other calamity left him/her unable to earn money indefinitely.
  • the individual receives money as a result of an accident settlement.

Even though the trust is funded by the beneficiary’s own assets, it must be created by a parent or grandparent (with or without an attorney’s help), or by a court. The trustee, not the individual, controls how money is invested and disbursed.

Remember how I said that with third-party trusts, the person creating the trust can specify what happens to all the funds after the death of the beneficiary? Not so here: with a first-party trust, the government gets reimbursed for medical costs during the individual’s lifetime. So if the trust fund has $6000 in it when your child dies, but s/he had used $8000 worth of Medicaid overall, the government takes the $6000 – nothing is left for anybody else. If your child had used only $3500 worth of Medicaid, there would be $2500 left for someone to receive. When the trust is established, you can specify who will inherit what’s left after the government recovers the Medicaid costs.

Pooled trust (also known as a (d)(4)(C) trust). A nonprofit organization runs the pooled trust, which manages the investments from many individual beneficiaries. Each individual has his/her own account within the pooled trust. Financial experts at the nonprofit use the pooled money to make stable investments. They also provide fund management services to the individuals.

With a pooled trust,

  • the individual doesn’t have to rely on a family member to set up a trust or to manage it.
  • assets belonging to the disabled individual can be put in the trust. However, parents and others can also contribute.
  • the organization running the pooled trust appoints a trustee for each account holder.
  • from what I gather, the expenses associated with a pooled trust are significantly less than using an attorney for all your SNT needs.

As with a first-party trust, the government has first dibs on the funds that are left after the beneficiary dies, to recoup medical costs as much as possible. Also, in some states, the nonprofit organization is allowed to keep a percentage of what remains in the account to help support its mission. (But this source says all the leftover money stays with the nonprofit…? I guess we can conclude that with a pooled trust, one way or another, little or nothing will be available after the trust beneficiary passes away.)

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If you want to read more about the different types of special needs trusts, feel free to follow this link and/or this one.

Any of these special needs trust varieties should allow the individual to collect SSI and to benefit from Medicaid – as long as certain rules are followed. What those rules are will be covered in a later installment – don’t you love cliffhangers?

Special needs trusts – Part 1: What they are, & motivation to create one

Special needs trusts: you’ve probably seen the phrase. Maybe you have a vague idea that they involve the inheritance for disabled adult children, and an even fuzzier idea that you should set one up. But dang – they sound complicated, boring, and expensive. Anyway, who has the time or energy to think about the distant future when we’re overwhelmed in the here and now?

Yes, it’s easy to procrastinate, or to talk yourself out of creating a special needs trust. No government agency is going to penalize you for failing to set one up. Nor will a big brute with a heavy object clobber you if you don’t create one.

It took my husband and me five years of saying, “Yeah, we should do that” before we finally set up a special needs trust (SNT). And guess what? The process wasn’t as complex as we’d thought it would be, and the expense was reasonable for what was done. (Boring? Well …).

My goal in writing about special needs trusts is to motivate you to set one up also. You’ll then have the satisfaction of knowing you’ve made the future life of your disabled adult child the best you possibly could.

I’ll try to make the discussion about special needs trusts as clear and non-boring as I can. As part of that commitment, I’ll spread the discussion out over several posts, so your eyes won’t cross from reading one massive discourse about SNTs.

To start, we’ll look at the basics of a special needs trust, followed by my attempts to poke holes in reasons for avoiding setting one up.

SNTs in a Nutshell

Special needs trusts are in the same category as wills, living trusts, estate plans, etc. – they come into play after you, and your spouse (if applicable), have passed away. We don’t like to think about our death, but it’s guaranteed to happen (unless you’re immortal, in which case you’re excused from reading any further).

The idea of special needs trusts came about due to the “wealth” limitations for being covered by SSI and Medicaid: a disabled individual is disqualified from receiving benefits as soon as s/he has assets in excess of $2,000. If the individual’s assets exceed $2,000 after inheriting money directly from parents or other well-meaning relatives, poof! – there go the benefits.

So while you’re still alive and incredibly with it, you create a special needs trust for your disabled son or daughter. As part of doing so, you name a trustee: someone who will monitor and distribute the trust funds to cover your child’s expenses other than food and shelter (which are supposed to be paid for with SSI money). You also create an account that sits in the trust, ready to hold inheritances or other contributions. Because your child will have no control over the money in the trust, the money is not counted as part of his/her assets, so the government benefits are not jeopardized. Ta-daa!

Your special needs trust:

  • ensures that your disabled son or daughter can have an inheritance of whatever size available to sustain his/her quality of life, while also continuing to be covered by SSI and Medicaid.
  • designates someone you trust to spend funds for the good of your son or daughter, based on your documented wishes.
  • avoids probate costs.
  • documents the final arrangements you want for when your daughter or son passes away.
  • specifies how the funds in the special needs trust will be distributed after your child has passed away.
  • can be updated as circumstances change.

Future posts will go into more detail on many of these points. But, if you can’t wait to learn more, other sources have information on SNTs. This link from NOLO is titled “Special Needs Trusts – The Basics.”  CNBC has a clear discussion. And here is another discussion from the Special Needs Answers website. Books (remember them?) also have been written about SNTs. And if you attend a conference related to disabilities, check the vendors’ exhibits: chances are an attorney or a special needs financial planner will be among them.

Reasons to avoid creating a special needs trust, and counterarguments

1. Good health. You aren’t planning to die anytime soon: you are healthy, with lots of years between now and Your Deathbed Scene.

I am glad to hear you are healthy. Truly, that is good news. Now I hate to point this out, but Life has a way of throwing curveballs. For instance, all it takes is one car accident – one driver not paying attention – and your son or daughter could be facing life with you gone or incapacitated, like, tomorrow.

2. It costs too much. Money doesn’t grow on trees!

Doing nothing now costs you nothing (now) – this is true. I read somewhere that more than half of families with children with disabilities haven’t prepared a will, let alone a special needs trust. Without a will in place, the inheritance is distributed among your heirs as determined by the legal system. If that means the disabled child ends up with more than $2,000, SSI and Medicaid go away.

Wills by themselves are less expensive to create than trusts. You can download create-your-own-will forms for free, or hire an attorney, who might charge $200 – $600 for the task. However, wills won’t bypass the problem of losing government benefits. Also, probate costs significantly diminish the size of the inheritance. The next generation sure could use that money….

Living trusts and special needs trusts avoid these pitfalls, and have other benefits. But they do cost more for attorneys to prepare. Legal Zoom says attorney fees for creating a trust may range from $1000 -$1500 for an individual and $1200 – $2500 for couples.

Sticker shock? It is possible to prepare a special needs trust on your own, as this link from NOLO points out. I like how it discusses the pros and cons of do-it-yourself vs. hiring an attorney, depending on your circumstances. To prepare your own, you’d need time, persistence, a clear head, and attention to detail, among other attributes. Doing it incorrectly could have big consequences.

Although we did-it-ourselves for a couple of legal procedures in the past, for our special needs trust we opted to hire an attorney. His fees were $2,000. In addition to an SNT, our attorney and his paralegal prepared: updated wills for each of us, a family trust, healthcare powers of attorney, medical directives, and a few other documents. They also supplied instructions for the trustee of the special needs trust, which will be very useful when the time comes. All of this and more, plus their expertise – we felt we got our money’s worth.

And think of it this way: $2,000 translates into maybe 3-4 months of SSI at today’s payout rates. Isn’t it worth spending that much now to preserve years of your child’s SSI payments in the future? And for the individual to have medical coverage?

3. Depend on a sibling. You can leave your child’s share of your inheritance to another son or daughter, who can be trusted to follow your wishes in using that money for the sibling.

This scenario could turn out fine. However, as the CNBC discussion points out, the trustworthy son or daughter at some point may face a lawsuit, bankruptcy, divorce, or unexpected financial troubles – and that set-aside for their sibling could shrink a lot. A trust protects those assets from claims, creditors, and temptation.

4. Your son or daughter isn’t currently covered by SSI or Medicaid. Why set up a special needs trust to protect benefits s/he isn’t getting now?

The key word in that argument is “now.” Do you have confidence that your adult child will earn money consistently enough to be self-supporting for years and years? If they are chronically unemployed or employed part-time, will they have health insurance? After you set up the SNT, it’ll be there if and when your child needs it.

5. The new ABLE accounts will make special needs trusts obsolete. Right?

Not exactly. Here’s an earlier post about ABLE accounts. These accounts allow some disabled individuals who receive government benefits to have assets up to $100,000. However, there is a $14,000 annual limit on contributions to an ABLE account. And that $100,000 overall limit may be a problem for sizable inheritances.

 ***

Anyone with more arguments or expertise: feel free to comment!

Meanwhile, here’s the Big Idea: despite some hassle and expense, creating a special needs trust is worth it, to extend your love and care for your special needs child beyond the time your loving, caring heart has thumped for the last time.

UPDATE: I found this lively article on SNT procrastination, written by an attorney, after publishing this post. You’ll see some of the same arguments and counterarguments, plus more!

 [Source of the graphic: Slideshare.net – Katherine Zacharias]

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