Make 2020 the year you get your financial house in order. It’s not as hard as you think. You can do it in 4 hours. Seriously.
Once you have children, you know how important financial planning is, as is a will, power of attorney, and advanced medical directives. If you have a child with a disability, getting these things done right is imperative because the rules that apply to everyone else do not apply to your family. You need to take necessary steps to do this right.
Understanding this is a necessity for every family who has a child with a disability, no matter your income.
For example, do you know that if a person with a disability has more than $2,000 in assets when they turn 18, they lose Supplemental Security Income (SSI) eligibility? Do family members, who may potentially gift your loved one with a disability, know this? It may seem counterintuitive, but it is best not to save money in your child’s name until you understand what needs to be done. And while no one wants to sound ungrateful, you need to ask friends and family members to hold off on financial gifts until you know how to handle them. This also means that your child with a disability should not be a beneficiary of anyone’s will, 401k, or life insurance benefits.
Meeting with a financial consultant who specializes in special needs care planning can be very helpful. Don’t let the potential cost deter you. Local support groups often host free financial seminars. Some advisers will offer a free consultation. Your employer’s human resource department may have someone who can help. Be sure to look into all options and ask around.
You can also find an attorney who handles these cases and can draw up the necessary paperwork. They understand state and federal laws and will advise you on what to do now and when to come back to update documents.
In the meantime, here are some basic items to consider:
SPECIAL NEEDS TRUST
A special needs trust (SNT) allows you to save for your child while leaving them eligible for government benefits. Even if you don’t have money to set aside now, it’s important to establish a SNT so you can make the trust the beneficiary of your estate, life insurance, or any other assets so they don’t get passed directly to your child if something happens to you.
The Achieving a Better Life Experience Act expanded the use of 529 accounts (tax-advantaged education savings accounts for families; the money in them can only be used for college tuition) to help cover disability related expenses. The ABLE Act allows parents of children and adults with disabilities to put money aside for long-term costs such as medical and dental care, job training, housing, education, and other expenses. Contributions grow tax-free. Withdrawals for disability expenses would be tax-free.
Each state offers an ABLE account option. Virginia’s is called ABLEnow.
While ABLE accounts are an important tool for families, keep in mind that contributions are limited to $15,000 per year and limited to $100,000 before it impacts SSI eligibility. There is also a Medicaid payback clause. If you do utilize this as a savings strategy, it is recommended you still use a financial planner and establish an SNT along with the ABLE account.
WRITE A WILL
A will will specify what is done with your assets after your death. It’s important to stipulate that your assets are left to a special needs trust. Without a will, a judge could name your child as a beneficiary.
When writing your will, it is best to find a lawyer who works specifically with people with disabilities and understands your state’s disability laws. If cost is an issue, reach out to area disability groups such as your local Arc chapter to get started.
You will also be designating who will look after your child(ren) if something happens to you. This will force you to consider who understands your child’s needs. If a potential guardian lives in another state, you might want to look into its waiver system and what supports are available there.
POWER OF ATTORNEY
While compiling this paperwork you should also designate a Power of Attorney (POA). If you are married or have a partner, you will likely serve as one another’s. You will also need to identify a secondary POA. If you are a single parent, you might need to choose 2 POAs.
When choosing a POA, be sure the person is financially savvy and understands the nuances that come along with caring for someone with a disability. It should be someone you can trust and understands your child’s needs and interests.
CREATE A LETTER OF INTENT
A letter of intent creates a guideline for how to care for your child should something happen to you. It is not legally binding. But it can give courts and family members an idea of what you feel is best for your child. In the document you can include your child’s weekly routine, medical history, living arrangements, and anything you feel is important to your child’s well being. As your child grows older, they should be in charge of this document.
BUILD YOUR SAVINGS
This is easier said than done. Unfortunately, health insurance and Medicaid will not cover all of your child’s needs. And neither will the school system. If you can, try to set aside money each month to cover extra expenses. Just make sure those funds are not in your child’s name.
Once you do have these documents in order, be sure to find a safe, fireproof place to store them. Some attorneys will offer to store originals in their office. While you can scan this information and keep it in the cloud, beware of security. Additionally, if something does happen to you, as one attorney told me, others likely won’t know where to find it, whether in the cloud or in your home.
Be sure to alert beneficiaries of your intentions and make sure they are ready and willing to take on the roles you assign if something should happen to you. Mail and/or email them copies of materials they might need if something happens to you, but be sure to black out any information that could compromise your security such as social security numbers.
JUST DO IT
This may feel like a massive undertaking. It is not. I have done this twice. Once for the initial set up and again after relocating to a new state. In all, it takes about 4 hours over the span of several months. Let’s break it down:
30 minutes – finding attorney and scheduling appointment
1 hour – discussing with your partner your intentions/designations. Contacting others about the role they might play and whether they are ready and willing to do it
30 minutes – finding paperwork and assessing assets
1 hour – initial consultation with attorney
1 hour – finalizing and signing paperwork/putting it in a secure location and notifying others where to find it
Costs will vary. Some organizations offer highly discounted services and might even do pro bono sessions. When my family first did this for my son 8 years ago (SNT, will, power of attorney, medical directives, life insurance) attorney fees were about $2,000. Updating these documents will cost us $650.
PEACE OF MIND
Keep in mind, when these documents are handled by professionals they are written to include typical lifespan changes like new siblings or additional assets. You’ll only need to update them a few times in your life, such as when children become adults or when a spouse dies.
When this is all done, you will have something that is priceless – peace of mind that one of the most important things you can do for your family is done.