Government programs such as Social Security, Medicare, and Medicaid provide financial assistance to millions of Americans with disabilities. However, qualification for public “means tested” programs is typically available only if an individual has very limited financial resources. For example, programs such as Supplemental Security Income (SSI) and Medicaid generally require individuals to have limited income and countable assets of no more than $2,000. And the rules relative to qualification can be nuanced, difficult to navigate and are heavily scrutinized. Families trying to do the right thing for their loved ones can unintentionally or inadvertently cause reduction, disruption or even loss of public assistance. As such, the need for comprehensive estate planning for families with a family member with a disability is even more critical.
The challenge of planning with a family member with a disability is implementing a plan to provide necessary support without putting essential benefits at risk. Planning must be proactive and consider protecting benefits, supporting quality of life, and include long-term financial planning alongside long-term care needs.
As with estate planning in general, various tools and techniques can be coordinated depending on a family’s unique circumstances. A primary concern, though, is ensuring that money or other assets are not left directly to the individual with a disability, as this will jeopardize means tested benefits, and rather than providing additional benefit, these resources will have to be expended typically on care costs otherwise covered by public benefits. A beneficial plan should provide for the disposition and management of assets in a way to provide supplemental benefit to the individual with a disability.
A common tool to facilitate supplemental benefits to an individual with a disability is a special (or supplemental) needs trust (SNT). A SNT is a separate legal entity (trust) that holds funds for a beneficiary with a disability. The SNT is carefully drafted to allow money to be used for expenses that improve the quality of life but do not affect eligibility for programs such as SSI or Medicaid. The primary directive of the SNT is to use funds to supplement public benefits, not replace them. A single SNT can receive and hold gifts and inheritances from any number of family members or friends, and in any amounts.
The SNT can also provide for administrative flexibility and oversight of the use of funds, for example, allowing designated friends or family members input into some decision making. There should be a careful balance though, to avoid the SNT becoming too administratively cumbersome or complex. One size/form will absolutely not fit all, and families should work with experienced professionals.
It is also important to note that actual health care decision making and generally care and maintenance of the individual with a disability will be the responsibility of a conservator, which is separate and distinct from the SNT and the functions that the Trustee performs administering the SNT. While a discussion of conservatorship is beyond the scope of this article, the key distinction to keep in mind is that the Trustee of the SNT controls the purse strings, while a conservator oversees the care and custody of the individual.
A more recent tool in the special needs planning arsenal is the Achieving a Better Life Experience (“ABLE”) account. An ABLE account allows eligible individuals with disabilities to save a limited amount of money each year for qualified expenses such as housing, education, transportation, and healthcare. These accounts are not “countable assets” and therefore do not impact public benefit qualification if the funds are used for qualifying expenses. It is important to note that an ABLE account is the personal account of the individual with a disability. He or she is the account owner and has control and access to the account. Limiting the amount in an ABLE account may be prudent for individuals who may be vulnerable to being taken advantage of. If an ABLE account is to be included in a conservatorship to help protect against predators, this creates an additional administrative layer of reporting and Court oversight to be considered as well. While an ABLE account provides an opportunity for individuals with a disability to accumulate funds and exercise independence, it may not be appropriate in all circumstances. Also due to the limitations on annual and cumulative amounts, ABLE accounts are NOT a replacement for a SNT, but a tool that can be implemented as part of an overall, comprehensive plan.
The right approach to estate planning if there is a family member with a disability involves a combination of tools, carefully coordinated to reflect a family’s resources, goals, and the specific needs of the individual with a disability. Each approach should be examined individually and collectively, with the assistance of experienced professionals to avoid unintentional or inadvertent consequences.
