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Families with Special Needs Dependents

Having a dependent with special needs requires a focus on quality of life and a lifetime of care when approaching financial security. Helping families plan for their loved one's financial security and answer the question, “What happens when I’m gone?” requires specialized knowledge and specific skills in coordinating the financial and legal aspects. Our expertise and resources offer customized support to plan practically for each family's unique needs and priorities.

NEW! Check out our printable summary of ABLE accounts. They are often an important component of special needs planning!

Notes, Buckets, and Beneficiaries: An Introduction to Financial Assistance and Special Needs Planning

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The search for information and direction about financial assistance (benefits and support provided by government agencies) and special needs planning (preparation for future financial needs) can be especially frustrating for caregivers. Providing information and resources to help plan for quality of life during a lifetime of care is the primary focus of a special needs financial planner.

In many states, including New Jersey, Medicaid is the primary source of services for dependents with special needs (NJ Department of Human Services, Division of Developmental Disabilities, Supports Program and Community Care Program Policies and Procedures: A Quick Guide for Families, March 2020). While there are multiple ways to remain Medicaid-eligible, most often it is necessary for the individual with special needs to have less than $2,000 of assets in their name. The now widely available Achieving a Better Life Experience (ABLE) accounts allow the individual to deposit $16,000 per year and accumulate up to $100,000 without jeopardizing government support benefits. However, they do have a few drawbacks and typically cannot be the main source of long-term support planning. Most importantly, if a person with an ABLE account passes away with monies left in the account, Medicaid gets reimbursed for the cost of its services from the account balance remaining.

Proper financial and estate planning is vitally important so families and caregivers can plan for their dependents while preserving their eligibility for government services. Many people seek the services of a special needs financial planner because they are worried about how they will provide for their loved ones after they are gone. Over decades of planning, we’ve found that families have been concerned about three primary financial priorities for their dependent(s):
          1. Providing a good quality of life
          2. Preserving government benefits eligibility
          3. Providing lifetime care
Strategies to address all three are centered on a few basic ideas.

In my opinion, the combination of estate and financial planning remains the best and most effective way for families to realize their wishes for their dependents. In the estate planning area, using a qualified special needs attorney should be considered critical. While estate planning encompasses individualized plans that often include additional items, this article will focus on a simple understanding of wills, trusts, and beneficiaries of life insurance and retirement plans.

Wills = Notes
First, most are familiar with what it means to write a will. I consider a will, in simple terms, a note. If you were leaving someone to watch your home and your family while you went away for a weekend, you would leave them a note (how to reach you, what’s important to know about the house, etc.). Essentially, what a will accomplishes is to legally say what will happen to all of your “stuff”, who will become guardian of your dependents, and who will be responsible for these tasks (the executor). A will may have specific references to creating a trust and may also reference a letter of intent, a detailed plan of how you would like your dependent to live after you are gone.

Trusts = Buckets
I consider a special needs trust vital in a successful financial and estate plan. There are many types of trusts, so understanding how they work can be confusing. A special needs trust is a particular type that is imperative to allow individuals with special needs to retain government services eligibility. In simple terms, I consider a trust a bucket. What does a bucket do?
          • It holds things. As your personal legal bucket, a trust allows you to put assets in it, either while you are living or after you are gone. Those assets may be used for dependents with special needs, while not having the assets in their names.
          • It protects what is in it from outside sources. In the case of special needs planning, it protects those assets from losing government services eligibility. Plus, it protects them from unscrupulous people or civil litigation, such as divorce. A parent or caregiver could leave assets directly to another relative or caregiver, but once that asset is in that person’s name; it can become part of a lawsuit or divorce. Having the funds in the trust (in the name of the individual with special needs) avoids these issues.
          • It allows you to control how things come out of it. You may pour out a little at a time, dump it all out at once, or anything in between. A trust, particularly a special needs trust, allows the grantor to control assets so they may be used for a dependent with special needs even after you are gone.

The above is a basic overview to help families understand how these important documents make a difference in the lives of our dependents with special needs. Working with qualified special needs attorneys is critical to the success of your plan! The last thing you would want to happen is that, after your death, Social Security, Medicaid, or other government agencies determine that your trust doesn’t qualify as a special needs trust because it wasn’t written properly by a qualified attorney. The only things that can correct this problem are time and money…and who will correct the problem after you are gone?

Check Your Beneficiaries
Lastly, knowing that a dependent with special needs cannot have more than $2,000 of assets in their name, here is your easily done action item: make sure that no individual with special needs is a primary or contingent beneficiary of any relative’s life insurance policy or retirement plan like a 401(k), IRA, or pension. Most group life and retirement plans, as well as individual policies, use a default option for contingent beneficiaries that splits proceeds between all surviving children…therefore putting the government support benefits of your special needs dependent in jeopardy! Instead, use special needs trusts and an ABLE account to hold those funds and provide for their future.

In summary, remembering a will as a note, a trust as a bucket, and that dependents with special needs should never be direct beneficiaries on any individual or group benefits is a simple way to begin thinking about and solving the top concerns of families planning for their loved ones’ futures.

We do not offer tax or legal advice. For advice concerning your own situation, please consult with your appropriate professional advisor.

Donald Brown is a Registered Representative and Investment Adviser Representative of Equity Services, Inc. (ESI). Securities and investment advisory services are offered solely by ESI, Member FINRA/SIPC, 200 Schulz Drive, Suite 125, Red Bank, NJ 07701, 848.200.7170. Special Needs Funding Coach is independent of ESI.TC129173(1022)1

Special Needs Planning Beyond the IEP Article

Caregivers planning for the financial future of their adult dependent with special needs have different issues to consider than caregivers of younger dependents. So special needs planning can be very different for those who have dependents in each category.

For many caregivers of children or young adults receiving educational services, the nature of the disability and interventions may cause the ultimate prognosis to still be uncertain. These caregivers often do not know what type of long-term support their loved one will need and whether they will be able to live independently. They may not yet know what outcomes all of their hard work and advocacy will lead to in the long run. 

Caregivers of older individuals may have a clearer sense of their adult capabilities, the supports they require, and what the future may hold for them. They understand whether they will go into college, their employment opportunities, independence with Activities of Daily Living (ADLs), and proficiency with social skills. They know whether or not their dependent will be self-sufficient, require government benefits, live alone, or need supplemental assistance and support to be provided through special needs planning.

Caregivers of both younger and older dependents may need to calculate just how much money is needed to supplement educational, medical, social, recreational, housing, or vocational services. Government benefits may need to be supplemented through additional planning. Some of these issues are directly related to calculating how much money is actually needed when special education services end.

After a student’s twenty-second birthday, mandated education services are generally no longer provided. The Individuals with Disabilities Education Act (IDEA) of 2004 ( requires that children with disabilities receive:

  1. An initial evaluation to determine if the child has a disability
  2. A free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepare them for further education, employment, and independent living
  3. Education as close to home as possible in the least restrictive environment with children who do not have disabilities
  4. Supplemental services (such as speech therapy, occupational therapy, or a classroom aide) to complete their education

Caregivers of dependents with special needs who turn 22 and transition from special education services into the adult services arena are faced with many new issues and obstacles. Hopefully, well-designed transition plans were put in place years ago by the educational team, and the student successfully transitions to further education or employment. The nature, scope, and severity of the disability will determine whether additional transition, rehabilitation, day programming, medical, or vocational services are needed. Some adults with special needs will continue to receive government benefits such as SSI and Medicaid, while others will not.

Many privately held health insurance policies do not cover students or adult dependents with special needs past the age of twenty-six. Caregivers need to carefully review their health policies and contact their benefits department to determine extended coverage, which varies from plan to plan.

For those who do not receive government health insurance benefits, the cost of medical care is staggering. Many states provide supplemental health care coverage for people with special needs over age 22, which may not be tied to SSI eligibility. These supplemental policies may require either an extra premium, larger co-insurance percentages, or deductibles. However, many states do not provide supplemental health care policies for adults with disabilities. Caregivers need to check with the social service agency that administers Medicaid in their county or state to determine the level of coverage and services provided in their area, since they can vary from state to state.

In addition, many states offer choices between Medicaid providers, and coverages between those plans can vary as well.

Caregivers of adults with special needs often experience “sticker shock” and large medical bills if their dependent is not receiving government health insurance benefits or if they are not covered under a caregiver’s individual or group health policy. These caregivers should seek out knowledgeable professionals and advocates to help secure needed health care benefits and services for their dependent. There are advocacy organizations in most states that can advise caregivers on health insurance issues.

Special needs planning, when coordinated with a properly funded special needs trust, can help caregivers plan for the financial future of their dependent with special needs. If structured by knowledgeable special needs professionals, assets can pass to a special needs trust and not count towards the $2,000 SSI limit for an individual. This means that government benefits eligibility will be maintained, and money can be used to supplement the lifestyle of the person for whom the trust was established. The trustee needs to make certain that the money is used for supplemental purposes only.

An important part of special needs planning is to make certain that a mechanism is set up to provide enough money to meet long-term needs. Caregivers of children, whose needs are being met through their school, may find themselves with additional bills after their dependent graduates or leaves the educational system. They may now have to pay out-of-pocket for therapies and services previously provided through the IEP. Replacement services and costs need to be carefully planned. They will become the responsibility of the caregiver or individual after their twenty-second birthday.

Due to the complexity of federal and state laws, you may require a specially trained professional who can work with your other advisors to help you plan for the future of your dependent with special needs.


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