Long-term special needs financial planning can be challenging, especially with the complex legal and governmental issues surrounding disability. The wrong decision might create a tax burden or render a loved one ineligible for government benefits. However, by properly planning, understanding government benefits, and utilizing the right legal instruments, you can help ensure your loved one enjoys the quality of life they deserve.
Thinking ahead:?What type of future do you envision for you and your loved ones? How can you be sure your plans are carried out as intended? Just as you save and plan for your retirement, you can strategically map out your vision for the future by using wills and letters of intent.
- A will is a legally binding statement of your wishes. Living wills become especially important if you’re unable to communicate your wishes.
- Although not legally binding, a letter of intent is a written document that serves as a personal roadmap of your wishes and expectations for whoever assumes responsibility for your loved one.
Since both wills and letters of intent are living documents, it’s important to update them regularly because your needs, wants, and vision for your loved one’s future may change.
Navigating Government Benefits
In addition to employer benefits, such as life insurance, health insurance, and retirement plans, your loved one may qualify for certain government benefits. Government benefits can be either means-tested or entitlements.
Means-tested benefits are available to those whose income falls below a certain level. A few of the most standard types of means-tested government benefits are:
- Supplemental Security Income (SSI) is a federal program designed to help those who have qualifying disabilities or special needs. In order to qualify, an individual must have less than $2,000 in countable assets.
- Medicaid is a means-tested benefit that provides health coverage to eligible individuals with disabilities as well as others. Many states have “waiver” programs that cover day care, residential, career, and other services.
- Supplemental Nutrition Assistance Program (SNAP/Food Stamps) provides food assistance and has eligibility guidelines similar to SSI.
Not based on income level, entitlements are available to anyone who meets the eligibility requirement. A few examples include:
- Social Security Disability Insurance (SSDI) is a program designed for people with disabilities or special needs that have a work history and have contributed to Social Security, but have been unable to work for at least a year.?You could also qualify for the Children’s Disability Benefit.
- Medicare is a federal program that provides medical care to certain persons, including individuals with disability.
As you can see, some government benefits are not dependent on the recipient’s income, but many of them are. Because of this, it’s important to strategically use the right tools, such as a special needs trust, to ensure your loved one receives a lifetime of support and care.
The special needs trust acts as a receptacle for accepting money earmarked for your loved one with special needs. The proceeds in the trust can be used to pay for amenities that government programs fail to provide. Most importantly, assets held in the special trust are not counted when determining eligibility for government benefits.
Take the next best step
Whether you've already started planning or are unsure where to begin, a specially trained financial advisor can help.
Financial Advisors are Investment Advisor Representatives of and offer securities and investment advisory services? through Voya Financial Advisors, Inc., (VFA) member SIPC. Neither Voya Financial Advisors nor its representatives offer tax advice.