Special Needs Education Day and Special Kids Day are both during the First Week of December! Learn more about Special Needs Planning and enjoy delicious refreshments at our monthly client appreciation event on December 11. Find out more and RSVP here.
Alexandra and Steve have two children – Samantha, age 10 and Peter, age 3. Their assets include a townhouse valued at $400K (but with no equity), a car worth $10K, and a $100K life insurance policy. Alexandra and Steve have a combined gross income of $100K. They also have 403B plans and stock worth $50K. Recently, they learned that Peter has autism.
Since they aren’t wealthy, they didn’t think that they needed sophisticated estate planning documents like a special needs trust. They have since learned that the less a family has, the more tragic are the consequences of a failure to plan.
Autism is the fastest-growing serious developmental disability in the United States, affecting 1 in 88 children, and 1 in 54 boys. More than $13 billion a year is spent to care for individuals with autism. For the average affected family, this translates to $30K per year. Many parents believe that needs-based programs such as Supplemental Security Income (SSI) and Medicaid will be enough to take care of their family members with special needs when they are gone. This is a common misconception.
SSI is the federal needs based program that many special needs children and adults may be eligible for if they meet certain income limits. Many special needs children and adults may also get Medicaid to pay for hospital stays, doctor bills, prescription drugs, and other health costs. However, once the income of a person with special needs exceeds $2,000 a year, he or she is no longer eligible for SSI or Medicaid. In the case of Alexandra and Steve’s family, Peter’s would be forced to spend all but $2,000 of his inheritance before he becomes eligible for a single dollar of assistance.
We here at The Law Firm of Evan H. Farr, P.C., know that the majority of American families who have a loved one with special needs require a Special Needs Trust. These families typically have very little in tangible assets, second mortgages on their homes, and little to no savings (likely due to paying for the costly therapies). A Special Needs Trust is a vehicle that provides assets from which a disabled person can maintain his or her quality of life, while still remaining eligible for needs-based programs that will cover basic health and living expenses.
Using our example, here’s how it works: Alexandra and Steve create a Special Needs Trust to benefit Peter that provides instructions as to the level of care they want for him. After they are gone, the people they have chosen to manage the trust (trustees) can spend money on certain defined expenses for Peter’s benefit without compromising his eligibility for needs based programs. Read more about Special Needs Trusts here.
P.S. We encourage you to attend our Free Special Needs Planning Client Appreciation Event and bring family and friends. We also invite you to make an appointment for a free consultation with The Law Firm of Evan H. Farr P.C. to learn more about special needs planning.