Families with members with autism, Down syndrome and other developmental disabilities have different planning challenges than do more typical families.
- They have to plan for a second generation,
- Their planning must account for the governmental benefits of Supplemental Security Income (SSI) and Medicaid,
- Irrevocable trust tax rates are less favorable than individual rates and proactive management can improve after-tax returns,
- Coordinated legal, tax, planning, insurance and investment advice is the key to successful outcomes.
Special-needs planning requires advisors to consider two planning objectives that do not show up for typical families. Governmental benefits play a significant role, and those benefits can be worth hundreds of thousands to millions of dollars to the family member with a disability. People with disabilities are living long lives, and many are expected to outlive their parents; therefore, we need to plan for two generations.
There are two programs that are invaluable. First, let’s talk about SSI and Medicaid. SSI is an income benefit available to a person over 18 with a qualifying disability. The 2020 federal rate is $783 per month. A person receiving SSI can bring in more than $375,000 in a 40-year period. Medicaid-funded services including health insurance, supported living and therapy could total millions over that same time period. Directing someone to improve their estate plan to include these two programs could change a family’s financial life.
As mentioned, planning must incorporate a second generation. I can’t stress the importance of this. There are a lot of families that include parents in their 70s and 80s who have sons and daughters living at home. It is important that portfolios generate extra income, and they need to last longer.
When naming a beneficiary, consider how critical it is in directing assets to a trust and in how those assets are divided to provide support. This must be clearly stated. Another thing to consider is a home — it is one of the best assets for both wealth transfer and providing housing to a person with a disability — but proper plans must be in place to protect, maintain and pay for the home.
There’s a lot to learn in planning for these families, and as an advisor you play a crucial role in giving them unbiased, competent and personal advice. They are bombarded relentlessly with information, and they need help sorting through what is important and can work for them. Here are some key considerations: