What’s so special about working with families caring for individuals with special needs? The question is personal for Melissa Weisz, a wealth advisor and associate partner at Corient Private Wealth in Morristown, N.J. Her oldest son is on the autism spectrum. Attending to her son’s current needs and securing his financial future occupy much of Weisz’s daily attention.
All that fierce advocacy broadens Weisz’s effectiveness as a wealth advisor and source of difficult-to-obtain information for her clients. As a Chartered Special Needs Consultant designee at Corient, Weisz focuses on the financial requirements and unique planning challenges of families who care for individuals with special needs. “The challenge of preparing for a lifetime of protection for a family member or loved one with special needs is overwhelming,” Weisz says. “I am living the all-consuming complications facing families with complicated lives.”
The need matches the opportunity. A quarter of the U.S. population—61 million people—has a disability that makes independent living difficult or not possible, according to the Centers for Disease Control. For the families of people with such special needs, intergenerational financial planning is often a full-time undertaking.
For advisors serving a family dedicated to securing the long-term future of an individual with special needs, the first challenge is to reframe the relationship. In traditional plans, advisors focus on the retirement of the clients. When the clients have children, there’s an expectation that the children will launch and, at minimum, be able to live independent lives and that financial support or gifting will be discretionary.
Planning for individuals with special needs calls for preparing not only for the life expectancies of the clients but also for stewarding the financial assets of individuals who, thanks to advances in healthcare, may outlive them.
Practices Focused on Special Needs Planning
A small but growing number of advisors are focusing on special needs planning. Caleb Harty, founder and principal of Andover, Mass.-based Harty Financial, was introduced to the specialty in 2011 when he assisted a colleague whose son was diagnosed with autism and later a brother-in-law with a child born with Down syndrome. “I became alarmed that families most in need of a plan to care for a child with special needs really had no strategy in place for how estate planning, financial planning and public benefits intersect,” he says.
Harty notes that many families neglect planning for their own retirement because developing a strategy to protect lifelong support for the individual with the disability assumes more importance than securing their own futures. This is an understandable mistake advisors must challenge. Just as on an airplane, where the guidance is to secure one’s own oxygen mask before assisting loved ones, it is vital first to ensure the caregiver’s financial planning is on sound footing.
Fetal alcohol spectrum disorders, a group of conditions that can occur in a person who was exposed to alcohol before birth, are an area of special needs that are not yet foremost on the minds of advisors when they think about disability. Up to 10% of children born in the U.S. and up to 25% of adoptees have been exposed to alcohol before birth.
Kathy Hotelling of Pittsboro, N.C., has spent the last three decades organizing benefits and care for her adopted daughter, now 30 years old. While the daughter is officially living independently, the reality is that securing and maintaining the myriad benefits the daughter requires is a full-time job for Hotelling.
Mixed Results
Hotelling reports mixed results in her interactions with financial advisors over the decades. In one instance, she says, when her daughter was very young, a financial advisor suggested putting some stock in the daughter’s name. “Even then, I knew that putting assets in my daughter’s name would be her undoing regarding eligibility for public benefits,” Hotelling recalls. She switched advisors.
Today, Hotelling is satisfied with the services she receives from two financial advisors she regards as her team working to provide for the daughter. The advisors first helped set up a tax-advantaged ABLE account, which provides funds to enhance beneficiaries’ quality of life without sabotaging government help they might otherwise qualify for.
As satisfied as Hotelling is with her current advisors, she doesn’t rely on them to educate her on the latest services and benefits available to her daughter. The best source of information, she says, is from parent groups that have the most incentive to be educated on the possibilities. “Sit down and learn from parents already knowledgeable about the field.” Hotelling advises. “Parents who are organized are in privileged positions to do research, network, and are often the best resource for what’s available.”
Congress created The Achieving a Better Life Experience (ABLE) accounts in 2014. The measure provides that up to $100,000 in an ABLE would be disregarded for the purposes of determining a beneficiary’s eligibility for Supplemental Security Income. So, for example, instead of Hotelling’s daughter paying her rent directly—which would count as income and hurt her SSI eligibility—she makes annual contributions, and the rent is disbursed from the ABLE account. In 2023, parents or others can contribute, in total, up to $17,000 per beneficiary, an amount that increases as the annual gift exemption is adjusted for inflation.
What Is a Pooled Special Needs Trust?
A Pooled Special Needs Trust, also referred to as a (d)(4)(C) trust, is a variety of SNTs managed by a nonprofit wherein the assets of many people with special needs are pooled together. While each beneficiary’s account remains its own, the trust can provide management services and invest in products that may not be available to a single beneficiary. Participation in a pooled SNT may be available to a person over 65, unlike a plain vanilla SNT.
Depending on the pooled trust, a beneficiary might work with a social worker or trust advisor to tailor a funds distribution plan that fits their lifestyle. As with an individual special needs trust, funds in a pooled trust supplement a beneficiary’s government benefits. The funds can be used to pay for expenses within specific permitted criteria. These expenses often increase or improve the beneficiary’s quality of life.
Beneficiaries of Medicaid and SSI looking to spend down their assets to qualify for or remain on government benefits can transfer funds directly into a pooled trust account, often on their own and without having to rely on a family member’s help.
Responsibilities of Trustees
Perhaps the foremost responsibility of trustees is to ensure that they do not inadvertently imperil the beneficiary’s eligibility for Medicaid and SSI. Even for high-net-worth families, such eligibility can be critical. Medicaid and SSI are both “means-tested” benefits programs; beneficiaries must not exceed certain income and asset or resource limits. A pooled trust can help a person stay within these limits and continue receiving benefits.
More than a healthcare program for people with low incomes, Medicaid is not only the nation’s primary health insurance program for people with disabilities but also a ticket to numerous services for individuals with disabilities and their families. For example, Medicaid provides funds to keep people with intellectual and developmental disabilities in the community. Medicaid is generally the only source of funds for them to live and work in the community with friends and families and avoid more costly and segregated nursing homes or institutions.
Most people understand Medicaid as a health care benefit for low-income people. What’s less well understood is that Medicaid also benefits people with disabilities and is, moreover, the gateway into multiple services and benefits of immense value to even HNW families who have the means to pay for healthcare privately. So even if the health insurance component of Medicaid is not relevant, the other benefits often are.
The rules for Medicaid eligibility are infernally complicated. While Medicaid and SSI are tightly linked federal programs, Medicaid is administered on a state-by-state level. In New York, for instance, Medicaid recipients may not have more than $28,133 in resources and $1,563 per month in income. SSI limits differ. To receive SSI benefits in New York, an individual may not have more in countable resources than $2,000 or gross income from work that exceeds $1,913 per month.
A typical scenario trustees must guard against is beneficiaries coming into money—proceeds of an accident settlement, perhaps—that pushes them over the limits. Here, a pooled trust offers a solution.
Two other points. First, Pooled Income Trusts, like Special Needs Trusts, are irrevocable; contributions cannot be reversed. Moreover, a payback provision means that upon the beneficiary’s death, any funds remaining in the trust (up to the total lifetime medical assistance paid on behalf of the beneficiary) must be turned over to the Medicaid state that provided benefits.
Inclusive Language
How can advisors help families ensure the highest quality of life for beneficiaries with disabilities? One place for advisors to start is by checking the language they use. “Let the client take the lead,” suggests Weisz. Use person-first language (a person with a specific disability) versus disability-first language (a disabled person). So, it’s better to say, “John uses a wheelchair” instead of “John is restricted to a wheelchair.”
Emphasize abilities, not limitations. It’s a person who uses a device to speak. Not a mute person. Keep the value judgment out of it. It’s a person with multiple sclerosis, not a person who has multiple sclerosis. Avoid terms such as “normal” person or “healthy” person. Finally, avoid portraying people with disabilities as inspirational only because of their disability.
Advisors do well by asking, in the ordinary course of data gathering, “Are there any special needs in the family?” From there, it’s logical to pivot to problem-solving: “Let’s get our arms around the situation and figure it out.”
“It’s never too early to start transition planning,” Weisz concludes. “The resources are out there. They need coordination. Advisors are uniquely positioned as quarterbacks of a family’s financial future—to take the lead with the inclusive and long-term relationships required to adjust course as life unpredictably unfolds. “Everyone is in constant survival mode dealing with the here and now,” Weisz continues. “Taking things one day at a time has its limit. There is freedom in having a plan.”
