Qualitative Planning
- Living situation: Does your family member want to live alone, with others, or with a romantic partner? If with others, then how many others? Does your family member prefer to live in a big city or a small town? In the city center or in a suburb? Do they prefer a single-family home or townhome, or are they comfortable in a high-rise or large complex? Does the weather or climate matter to their health and mobility? Do they need to be proximate to work, certain activities, family and friends, their faith community, public transportation or healthcare providers? Does the physical property need to be accessible or incorporate inclusive design or assistive technology?
- LIFE PARTNER: Does your family member have a life partner? What type of support would your family member need to maintain that kind of relationship? What does that person’s support circle look like and how does it intersect with your family member’s? Do both people and both families have the same approach to independent living? Will legal marriage impact either partner’s benefits and, if so, what should they do about that? If your family member does not yet have a partner, but wants to, how will s/he find that person?
- WORK: Does your family member work, or do they have potential to work in their next stage of life? Does the person need additional school or training in order to prepare for a job? Where are the types of jobs for which the person would be qualified? How far is the reach of agencies that provide job coaching or other employment support? How many hours per week will your family member be able or want to work? How will they get to and from work?
- LEISURE AND SOCIAL ACTIVITIES: Who are your family members’ friends? How will your family member stay in touch with friends and make new ones? What sort of social and recreational activities does your family member enjoy? How will your family member exercise and stay healthy? Is it important to your family member to maintain participation in a faith community, a sports league, a club or other types of organized activities? Does the person need assistance to sign up for, schedule, and travel to these various activities?
- HEALTHCARE: Does your family have significant or particular healthcare needs? Who will help them to schedule and manage appointments, interpret medical information and make medical decisions? Who will accompany them to therapies and treatments? Who will know about and stay on top of their medications?
Benefits Planning
Your family member with a disability has the potential to access a number of Federal and State benefits, particularly once they become an adult and age out of school, which typically happens between 19 and 26, depending on your state of residence. However, the applicant is required to provide certain evidence of eligibility for these benefits. Often, it is best to begin to collect the evidence several years prior to the application. Some of the evidence has to date from before certain birthdays. Some require a particular organization of assets. Some require management of income. I recommend to clients that they prepare for and apply for all benefits for which the family member is eligible, even if the person does not need the benefits immediately, or may at some future point have the capacity to live independent of the benefits. Here is what people with disabilities need to know about the basic eligibility for certain benefits:
- Supplemental Security Income (SSI): This is a cash benefit available to people with disabilities who have low income and few assets. Frequently, a person will not qualify for SSI prior to age 18, because at those younger ages, parental income is “deemed” to be available to the child and therefore most children have too much income to qualify. However, at age 18, the person with a disability may apply as a “household of one” and only her or his income and assets will be considered. If the person with a disability is still living with parents, as most are, the parents will be considered to be providing “in-kind” income to the young adult with a disability. Although the person will still qualify, they will not be eligible to receive the maximum SSI benefit. Applicants can avoid this by paying rent, room-and-board, or fair share contributions to the parents. There are subtle differences among those payment structures, which are beyond the scope of this article. Because SSI is a means-tested benefit, any unearned income the recipient has will reduced her/his maximum SSI payable, dollar for dollar, and any earned income will reduce it by 50 cents on the dollar. SSI represents additional dollars that can pay for the person’s living expenses and support needs.
- MEDICAID: In many states, people with disabilities whom the Social Security Administration has declared eligible for SSI are automatically eligible for Medicaid. In other states, the eligibility criteria are the same, but the person must apply separately. In a few states, such as my home state of Illinois, the criteria for Medicaid are narrower than those for SSI, and the person must apply separately. Typically, a person who is eligible for SSI will also be eligible for Medicaid. Although Medicaid is not the best health insurance; it can be a lifesaver for people who have no other health insurance option. For people that do have other health insurance plans, Medicaid can sometimes be the secondary or tertiary payer. Moreover, Medicaid is crucial for accessing services funded by Medicaid Waivers, discussed below.
- Social Security Disability Insurance (SSDI). People with disabilities who work will accumulate Social Security credits. The younger a person is, the less credits s/he needs to be insured for SSDI. At the far end of this continuum, a person who is not yet 24 years old only needs six credits to be fully insured. For 2022, a worker will earn one credit for every $1,510 in gross income, up to the maximum four credits available per year. So you can see that a young worker with a disability can build up the needed credits with only part-time employment. Older workers will need an increasing number of credits. The full table can be found here: https://www.ssa.gov/benefits/retirement/planner/credits.html Unlike SSI, SSDI is not reduced for unearned income. Earned income only impacts eligibility once it is consistently over the overall threshold that demarcates Substantial Gainful Activity, which is $1,350 in gross earnings for 2022. A person may continue to receive some SSI if her/his SSDI benefit and work income are low enough. SSDI channels more dollars into the person’s income-and-expense equation.
- Childhood Disability Benefits (CDB, aka Disabled Adult Child benefits, DAC): If a person’s disability conditions started prior age 22, and the person never earns consistently over the SGA threshold, then the person will become eligible for an auxiliary benefit based on a parent(s)’ work record. This benefit can be up to 50% of the value of the higher-wage-earning parent’s full retirement age benefit. If the young person is already receiving SSDI on her/his own work record, s/he will become eligible for an additional amount of CDB, such that the two combined will be up to 50% of the parent’s FRA benefit. Typically, a person who receives a CDB or DAC will have too much unearned income to continue to qualify for SSI.
- MEDICARE: Once a person has been receiving SSDI or CDB benefits for 24 months, s/he becomes eligible for Medicare. This is the same Medicare that is available to seniors and is a pretty good form of health insurance, particularly when the person’s income is low enough that Medicaid will cover the cost share elements of Medicare. Medicare coverage can reduce considerably out-of-pocket medical expenses, particularly for those who are dual Medicare/Medicaid eligible.
- MEDICAID WAIVERS: In most states, residential, employment and other living supports for adults with disabilities are funded by Medicaid Waivers. This allows agencies to receive Medicaid reimbursement for long-term-care type services provided in the community rather than in a nursing home setting. To access these services, the person receiving them must be eligible for Medicaid even if they are not using Medicaid for healthcare. Medicaid waivers, in the form of the value of the services they fund, can represent anywhere from $29,000 to over $100,000 annual infusion into a special needs plan.
- Supplemental Nutrition Assistance Program (SNAP), HUD and other benefits: In most cases, people who are eligible for SSI may be eligible for SNAP, provided they can demonstrate that they purchase and consume their food as a separate household. In many cases SSI applicants can concurrently apply for SNAP through the Social Security Administration. In this case, the fact that the person pays to live in the family home and is, therefore, a household of one—and is frequently taken to meant that s/he purchases food separately. HUD benefits such as rent subsidy or access to low-income housing units may be available in some states, although most areas have long, or even closed waiting lists. SNAP benefits typically provide only nominal addition to the person’s household income, but HUD assistance, where available, can significantly reduce housing costs.
SERVICES Planning
Benefits planning, as discussed above, can help the person with a disability and her/his family tap into all public income streams available to fund services. Effective Special Needs planning also requires the person with a disability and her/his family to understand and master the system used in the state of residence. Most states have agencies designated as gateways or point-of-entry. Most states also have more than one state department that overseas service application, service delivery and service funding.
I am going to use my home state of Illinois as an example. Illinois has multiple Medicaid Disability Waivers, including a children’s home-based waiver, a children’s residential waiver, an adult home-based waiver, an adult residential waiver (broken down into several subcategories) for people with intellectual and developmental disabilities, a waiver for person with disabilities generally defined (but typically meaning people with physical disabilities), a waiver for people with brain injury and a waiver for people under 21 who are medically fragile and/or technology dependent. Waivers and services for people with intellectual and developmental disabilities are ultimately managed by the Illinois Department of Human Services, Division of Developmental Disabilities. Waivers and services for people with physical disabilities are ultimately managed by the Department of Human Services Division of Vocational Rehabilitation. The gateway agencies for all developmental disabilities services are called Independent Service Coordination agencies. These manage a database called the Prioritization of Urgency of Need for Services (PUNS).
No matter my state of residence, as the family member of a person with a disability, I need to know under which waiver(s) my family member can be eligible for funding, through which gateway agency I can apply for this funding, whether there is a waiting list, and how I get my family member enrolled. I also have to understand clearly both the financial and non-financial eligibility criteria for accessing waiver services.
For example, in Illinois, to access services funded by any of the developmental disability waivers, the applicant needs to have evidence that prior to age 18 s/he had a measured IQ below 70 or a “related condition” that significantly limited the person in two out of six activities of living and self-care. This means that I should make sure that my family member has an updated psychological test dated prior to her/his eighteenth birthday, even if the school’s three-year cycle would delay that assessment until her/his age 18 and six months. I need to understand that I should enroll my family member in the PUNS database, that I should update the entries every year, and that no later than the date that my family member has aged out of high school transition, I should make sure that her/his PUNS status is “seeking services” rather than “planning for services.”
For young people who will need both funding from government benefits and services managed through the adult service delivery system, the primary documented evidence they will have to substantiate for their eligibility will be their Individual Education Plans (IEPs) and related documents. This means that these documents must clearly explain the person’s need for support. Many IEPs focus only on the positive in an effort to build the student’s and the family’s self-esteem. While this is a laudable goal and truly important, this approach must be balanced by realism. If the student gets As and Bs in her/his classes, respects authority, and gets along well with peers and instructors, it is fine to say this. But the IEP should also state that the student requires extra time, a certain number of prompts, a specialized environment, adapted curriculum, the support of paraprofessionals, personalized coping strategies, assistive technologies, therapies, or any other type of support to obtain those As and Bs. The document should also state clearly how much of the time the student is in general education and how much in special education.
Without the inclusion of this definite and concreted evidence, it may be difficult for the family to justify their young adult’s very real need for services, post-transition.
Comprehensive Financial Planning
People with disabilities may require significant supports and services in order to live their most independent and fulfilling lives. Few people with disabilities want to live in congregate settings and many do not want to live their entire lives with their parents or siblings. Many want to work, travel, have a romantic relationship and enjoy social and recreational opportunities. While government benefits will cover some of these expenses, they will not cover all of them. And the people with disabilities who want to and have the ability to do the most are also the people who, due to their capabilities, may be eligible for less public funding than their peers. It will be up to the person with a disability to use work earnings, and the family to use family money, to bridge the gap between what the public benefits will cover and what the person’s lifestyle will actually cost.
It is generally a good idea to build two financial plans. The first maps out the adult life income and expenses of the person with a disability. That way, the family can see clearly how financially self-sufficient the person can be and how that may change over time as s/he becomes eligible for additional public benefits, has work income increase due to job tenure or advancement, or decrease due to declining health or has services needs decrease due to maturity or increase due to aging. It also helps the person with a disability and their family to understand the trade-offs between working more and staying eligible for certain benefits that have an income threshold.
The second financial plan maps out the families income and expenses both before and after retirement. The latter expenses must also account for the parents' potential long-term care needs. This way, is it possible to see how much of the family’s resources will be consumed during the parent’s lifetime and how much will be left over to fund a special needs trust. It also permits the timely mitigation and management of risk through the strategic purchase of disability, long-term care (where appropriate) and life insurance, and helps the parents to make informed decisions about how best to save and invest money. It is also crucial to create, with the help of a qualified attorney with special needs experience, the legal documents that will hold and manage the family’s assets in a way that will preserve the eligibility of the person with a disability for the necessary government benefits.
LEGAL Planning
As a financial planner who is not an attorney, I can only speak in a very general way about the types of legal documents and structures a family needs to undergird a secure and enjoyable future for their family member with a disability. Please consult a qualified special needs attorney to help your family define which of these documents is appropriate and necessary.
- WILLS: SSI and Medicaid are means-tested benefits with strict assets limitations as eligibility criteria. It is crucial to ensure that a person with a disability who needs or wants to access SSI and Medicaid (including Medicaid waivers) does not receive by inheritance a sum of money that could render her/him ineligible. For this reason, it is important that the person’s parents, as well as grandparents, siblings and any other person who might leave money to the person with a disability, has a will that specifies the money not go to that person directly.
- Supplemental (or Special) Needs Trust: A supplemental needs trust holds assets for a beneficiary with a disability in such a way that no ownership is attributed to that person, and s/he remains eligible for SSI and Medicaid. There are supplemental needs trusts that can hold money that already belongs to the person seeking SSI and Medicaid. These are called first-party trusts. There are also trusts that are designed to hold money originating from parents, grandparents, or others. These are third-party trusts. For lesser amounts of assets, families may consider pooled trusts in which each beneficiary has a separate account managed under one master trust for the sake of cost efficiency.
- Powers of Attorney: People with disabilities who are over 18 are legal adults and able to make their own decisions when it comes to finance, healthcare and many other areas of life. Moreover, without documentation, a parent is no longer able to obtain financial or health information, or assist in the management of these areas of life for their child with a disability. It is important that the person with a disability designates an agent via a Power of Attorney if s/he needs and wants assistance in these areas.
- Guardianship: For people with disabilities who need significant support making financial, healthcare and many other life decisions, guardianship may be appropriate. However, it is important to understand that guardianship strips the person with a disability of certain rights because they are presumed under the law to be incompetent.
Planning for your family member with a disability is a complex and multi-faceted process best accomplished by starting early, engaging skilled advisors and working step by step, using the big-picture qualitative vision as the overall guide.
ABOUT THE AUTHOR:
Alexandra Baig maintains her own national financial planning practice, Companions On Your Journey, and also acts as the Benefits Specialist for Clancy & Associates, a Chicago-based law firm focusing on special needs planning. Alexandra has an MBA from the University of Michigan and her CERTIFIED FINANCIAL PLANNER™ designation and is a member of the Academy of Special Needs Planners. In particular, she is well-versed in the government benefits available to people with special needs and the rules governing them. Her goal is to help people with disabilities and their families make the most of public and private money to live the life they chose.
Read the article here.