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Special Needs Planning, Pt. 2: How Merrill Calculator Can Help Special Needs Families

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This is the second in a four-part special report on special needs planning for advisors and their clients. In part two below, an example of how the calculator can help a family.


The financial planning portion of Merrill Lynch’s approach to planning for special needs families, using the calculator, says Modesto, Calif.-based Merrill advisor Scott MacDonald, “is a starting point for more customized, sophisticated planning with an advisor if the client chooses” to pursue it. That is what MacDonald’s team does “for hundreds of clients.”

Merrill Lynch advisor Scott MacDonaldThe 10-year-old group at Merrill has used previous versions of the special needs calculator in its planning, but the new version is more user-friendly, with easier inputs, says MacDonald (left), and allows, for example, a sliding scale to accommodate changes in expenses and income, as well as “links for input about what certain expenses might look like, and some guidance about what costs and needs [families] might need to foresee in the future.”

The complexities can indeed be daunting, when a single well-meaning gesture by an uninformed relative can destroy a financial plan through a bequest or beneficiary designation that does not account for special needs laws and regulations and disqualifies a child for aid. Families with a special needs loved one, says MacDonald, are under a lot of pressure.

“They’re forced to wear many hats,” he points out; they have to “advocate for their loved one … at the school district to get them [educational] programs, to get them the resources they need for their disability. They also have to navigate the trusteeship of the child’s assets, his health issues, care management issues, etc. It’s a daunting task. Having basic or traditional advisors—financial, legal, health—doesn’t really fulfill their needs; it’s like trying to cure cancer with a GP [instead of a specialist].”

MacDonald offers an example of how the calculator can be used to ward off financial disaster. First was the case of a California family with a 6-year-old son afflicted with cerebral palsy and a paraplegic because of medical malpractice. The child “can’t walk; eat normal food; feed himself; has very limited use of his arms and no use of his legs; can’t communicate very well or speak well,” says MacDonald, ticking off problems.

The mother and father had to provide 24-hour care, he adds, and navigate issues for proper schooling and physical therapies; the child had to be fed with a feeding tube, two of those feedings coming in the middle of the night. In addition, the parents had to cope with getting adaptive equipment for the house and car, and physical therapy.

When they were referred to his practice, he says, “they’re run down, exhausted, ready to be divorced, and have an able-bodied 8-year-old son who is being neglected” because of all the time they were devoting to their special needs child. They needed respite care, and the court didn’t want to allow it.

“Using the calculator and other planning methods,” says MacDonald, “we were able to look at the funds they had available, public benefits and what they could save from the father’s business. We could see how much they could afford over time for caregiver help and respite care, and how much would be paid by MediCal. We were able to devise a budget for them to have the money last all the way through their child’s lifetime, to take care of him. And they got back their family life, got to do things with their 8-year-old and got to be a husband and wife instead of just caregivers.”

The legal issue with this family that the calculator helped to resolve focused on the cost of respite care. In California, says MacDonald, a special needs trust–which the child had because of the medical malpractice settlement–is created through the legal settlement with ongoing court supervision, and the court appoints an attorney to advocate for the disabled individual.

Often, he says, the court-appointed attorney disagrees with the parents on care—and, by the way, the money to pay that court-appointed attorney comes out of the special needs trust. In this case, he says, the court-appointed attorney was opposed to the cost of respite care lest it deplete the special needs trust and leave the child with nothing. The calculator, along with “more sophisticated planning tools,” allowed them to gauge the likelihood of the family’s investment plan achieving its goals.

The court, says MacDonald, “actually looked at this information and mediated the squabble between the attorneys, and approved the budget for respite care. We were able to show that the parents had an 85-90% probability that they could spend $30,000 a year for respite care and not run out of money for the child.”

In addition, the cost of the court-appointed attorney was reduced because he was not actively fighting the family on the issue. So the trust was saved the cost of legal fees.


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