Planning for Dependent (or not Independent) Family Members

One in four Americans has some form of disability. In our law firm’s client base, it is very common to have a family member that is not entirely able to live independently. Even worse, adults with disabilities are living far longer than in the past, which means their aging parents must plan for the day when their dependent (or not entirely independent) children outlive them. We strongly recommend that asset planning and support services need to be put into place to provide care for disabled persons. Here are some important legal issues to plan for:

Use a Special Needs Trust. You can preserve the disabled person’s eligibility for government assistance programs, including Supplemental Security Income (SSI) and Medicaid, through the use of a Special Needs trust. Any amount of money can be placed in the trust, and the funds do not count when determining eligibility. If parents leave money directly to a disabled person, they will lose their ability to get SSI and Medicaid benefits.

A Special Needs Trust (SNT) should be set up before the disabled person turns 18. It does not need to be funded (meaning assets transferred or gifted), but it should be created. For example, any amount of money can be put into a special needs trust, and the funds in the trust do not count when determining eligibility for government benefits. Medicaid recipients become ineligible if they have more than $2,000 in assets.

If the disabled person receives SSI, money from the trust may not be used for food and housing, but it can be used for other costs, like therapies that are not covered by Medicaid, or even extras, like a cellphone or vacation. An experienced elder law attorney will be able to help the family with planning and learning the intricacies of these rules.

Selecting someone to manage the trust (the Trustee) on behalf of the disabled person is a critical decision, and not always an easy one. The trustee should be someone responsible who cares about the disabled person ’s well-being. It could be a sibling if the relationship is good, or a family member. The person should be younger than the parents, so they will be around after the parents have passed.

Open an ABLE Account (Achieving a Better Life Experience) account. These are accounts that work in much the same way as a 529 account. They can be established for a disabled person at any time, but the person must have a qualifying disability before age 26. Money from an SNT can be moved into an ABLE account, and the beneficiary can use it for any qualified disability expense.

Prepare (and update) a letter of intent or guidance. This is not a legally binding document, but rather a way of sharing information with others about the disabled person: their preferences, routines, comfort levels, and wishes. It can also be used to provide information about caregivers, medical providers and others who are a good fit for the disabled person. You may also wish to share information about what and who they do not like. Update the letter every year or two.

Create a Power of Attorney. Having a power of attorney for a disabled individual is far more flexible and less costly than a conservatorship or guardianship.

Housing options. Where will the disabled person live? That depends on what kind of disability the disabled person has and the family’s financial resources. The disabled person ideally can transition from the family home to another place while the parents are still living. If feasible, the parents could leave the family home to the disabled person in the SNT, but they will also need to leave enough money for ongoing expenses and maintenance of the house. Some disabled adults live in group home settings, where counselors and other staffers help residents live on their own.

A qualified elder law attorney will be able to connect the family with many different resources and help with creating a Special Needs trust.