With each passing election season, the conversations about the cost of government-provided health care and Social Security get more urgent.
But debates about the deserving and the undeserving and the proper level of budgets and taxes tend to gloss over discussion of people with disabilities — a group of people who have no choice but to hope the programs don’t suffer cuts because they often don’t have any way to make up for the cuts.
There are 5.5 million nonelderly adults with disabilities whose health care was covered by Medicaid in 2009, according to a Henry J. Kaiser Family Foundation estimate using the most recent numbers available.
And an estimated 6.9 million nonelderly disabled people receive Social Security payments under the Supplemental Security Income program, according to federal government figures.
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For every one of those people (and many draw from several sources of government aid), there are often several family members helping to sort out the financial side of that relative’s care. They navigate a confounding thicket of tasks and rules.
On one hand, there’s the bureaucracy that government administrators may erect at any moment. On the other, there are specialized trust accounts and estate-planning issues to consider.
Even sophisticated investors and ace budgeters find themselves lost when encountering this for the first time.
There are few well-marked road maps, as there are for those trying to invest their 401(k) money or refinance a mortgage. But there are a growing number of financial advisers and other professionals who themselves have special-needs relatives. They know the practical steps most families need to take.
What follows is a primer from them on the basics to consider when helping someone with special needs.
When Mike Walther II talks to families for the first time in his work as a financial planner in Deerfield, Ill., he often parrots the standard flight-attendant announcement at the beginning of each trip: Put your oxygen mask on first before worrying about the family member next to you.
Walther, who has a brother with Asperger syndrome who lives with their parents, said he sometimes saw parents who had spent hundreds of thousands of dollars on therapies for their child and arrived in his office with no retirement savings at age 50.
“That’s a loving thing,” he said. “But now you have another problem. There is nothing for you. That special-needs kid is dependent on you guys, and now you can’t support yourself.”
Once you know what challenges family members face — and it can sometimes take years to understand what limitations they may have and what kind of financial support they will need — it’s probably wise to resist the urge to hunker down and sort it all out yourself.
“Life is totally rearranged,” said Mary Anne Ehlert, a financial planner in Lincolnshire, Ill. Her late sister had cerebral palsy, and Ehlert also runs a service called Protected Tomorrows that advises families on the life-planning tasks beyond the financial issues.
She hopes to one day have a large team of affiliated financial planners around the country who are experts on serving special-needs families.
Your best source of advice and referrals to local experts may well be your fellow travelers, so be sure to seek out other families in similar situations.
One of the first tasks that many proactive families tackle is often to set up a special-needs trust, which holds assets that can help pay for a disabled person’s care and expenses without disqualifying them for certain government benefits that are means-tested.
Some families feel an urgency to do this for estate planning, since they can direct proceeds of a life-insurance policy to the trust. They may leave the trust empty until that point.
Others start filling it from Day 1, as they would a college-savings plan, because they worry about the future of government benefits given the amount of federal debt.
“We’re in a hole, and I don’t know how long it will take to climb back out of the hole,” said Matt Syverson, a financial planner in Overland Park, Kan., whose 5-year old daughter has Down syndrome. “I don’t know if the benefits will be there or not. It would be nice if they were. I just can’t count on it.”
Any trust account may involve other people who can act as administrators, so you’ll need to have a frank conversation with them about what it would mean to either be responsible for your family member’s care or responsible for that person’s money (or both).
Others will want to help in any number of ways, but their help may be counterproductive.
Jerry Ruttenberg, who helps clients with life insurance and other financial planning at Firstrust Financial Resources in Philadelphia, faced this situation when his late father left $10,000 to his grandson Seth, who is brain-injured and receives government benefits that help pay for his expenses in the group home where he lives.
Ruttenberg spent many months back and forth with various government agencies before someone was able to help him keep the inheritance from disqualifying his son from continued government assistance.
“A dead person can’t unwind a mistake,” he said. “Part of doing planning is letting family members know what is going on.”
If you have family members with special needs, your estate plan needs a care plan.
“We call it ‘Sean’s Care Guide,’ ” said Walther, of the plan for his brother. “It can include foods. Caloric intake. That he likes to watch golf. Is the light on or off at bedtime? Here are their best friends and how to reach them. These are the kids that pick on him. Here are the medications, and here are the doctors who have not been successful in interacting with someone or don’t want to. This kind of stuff won’t be anywhere else, and you have to update it every now and then.”
A fair bit of the financial planning for adults with special needs tends to revolve around qualifying for, then preserving government benefits. But some families with reasonably high-functioning family members may not want to tap those benefits at all or even make sure they are eligible.
Walther counts his parents in this camp, since they came of age at a time when Medicaid was for poor people.
“They felt that we shouldn’t take that money out of other people’s pockets,” he said. One drawback, however, is that many government programs, say an art class or outreach service, may be available only for the Medicaid-eligible.
Ruttenberg has no such qualms about the fact Medicaid covers Seth.
He likens the theoretical possibility of needing to pay out of pocket for the expenses the government covers for Seth to paying college tuition each year for the rest of his life. “Eventually, it would bankrupt me,” he said.
James M. Hayes, a lawyer in Binghamton, N.Y., who specializes in estate and other planning for people with special needs and has a developmentally disabled adult son, is more blunt.
“I’ve never felt like I was taking advantage of anything,” he said. “It’s my adult son. I’ve never really felt that people who have adult children like my son should have a burden that other people don’t have.”