It is easy to think that something called a “special needs trust” is only used infrequently – after all, the very name implies the need for such a trust is rare. That could not be further from reality. Perhaps a more appropriate name would be “frequently needed trust.” Historically, special needs planning referred to financial planning concerns for individuals who are living with physical or intellectual disabilities diagnosed from birth, and that special needs planning was used by a niche group of individuals and families.
How big an issue is disability in our society? The number is surprising, as is the variety of individual situations for which special needs planning is needed. The Centers for Disease Control and Prevention estimates that 61 million adults in the United States live with a significant disability – that’s just over 1 in 4 adults who have some type of disability, whether a mobility impairment, intellectual and developmental disabilities, brain injuries, mental illness or chronic conditions. And those 1 in 4 adults do not include an untold number of Americans who may be dealing with the yet-unknown effects of “long COVID,” which could result in disability in the future. Given the high number of individuals who are currently living with or may develop a disability in the future, special needs planning is very important to consider when creating your financial plan.
The population of people with a disability is growing rapidly, mainly because of increasing longevity. Fewer than 7% of Americans under the age of 18 have a disability, but for those 65 and older, the incidence of disability leaps to 40% according to CDC research. The goal of effective special needs planning is to not only secure the financial future of the person living with a disability but to also create a meaningful, fulfilling life for that person.
So, what are the steps to create a special needs financial plan?
Preventing the Worst-Case Scenario
The first step is to understand the various governmental support options, how to qualify and maintain eligibility of these programs, and which programs are means-tested. Social Security and Medicare are insurance programs that most people are familiar with as retirement programs and are paid for with premiums withheld from wages. Medicaid provides health coverage for low-income adults, children and people with disabilities and is administered by individual states, according to federal requirements. There is also a Social Security Disability Insurance (SSDI) program for workers who are disabled before retirement age. There are some significant benefits those on SSDI can qualify for that are less frequently known:
- Receiving SSDI benefits for 24 months qualifies a recipient for Medicare, regardless of age.
- And a person who has a diagnosed disability before age 22 can become eligible for SSDI and Medicare based …….