Every parent wants to make sure their children are protected and cared for in the future. Children with disabilities face additional challenges in ensuring they have everything they need to have a safe and happy life.
Consider protecting your child’s government benefits while putting money away to supplement their needs and what they will need in the future.
Supplemental Security Income and Medicaid benefits can both be protected through special needs trusts and ABLE accounts. After your child reaches adulthood, you can continue to be involved in their medical care through a guardianship.
The following summarizes each of these special needs estate planning options.
How Can My Disabled Child Lose Their Government Disability Benefits?
Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and Medicaid may be available to your disabled child. Each of these programs has a bar of entry, however.
Individuals with low income and assets are eligible for SSI and Medicaid. SSI recipients may not have an income higher than $2,000 per month (for individuals) and no more than $3,000 per month (for married couples).
The resource limits to qualify for Medicaid vary depending on the state but are usually at or below the federal poverty level.
If an applicant has assets that exceed these maximum resource levels, the applicant may be ineligible for these services.
However, government benefits usually aren’t enough to cover your child’s needs, so you may wish to supplement their income. Keeping each program’s asset limits in mind, you must carefully plan how to account for your child’s financial future.
Special Needs Trusts
A special needs trust is an estate planning tool that can benefit families with members living with disabilities. These trusts are created by transferring property to a chosen trustee who will manage such property on behalf of the person with the disability, who may not be able to do so themselves.
Special needs trusts allow families to supplement the financial needs of their loved ones with disabilities. Money and assets kept in a special needs trust do not count as resources for government benefit purposes; therefore, they can help your child avoid losing their government disability benefits.
The money placed in a special needs trust must be used carefully. Funds can only be used to pay for the beneficiary’s medical and financial needs that are not covered by SSI or Medicaid.
Note that there are several different types of special needs trusts. Your special needs planner can help you decide which is the best fit for your family’s situation.
Creating an ABLE account is another option for families preparing a plan to provide for their disabled child long-term.
The Achieving a Better Life Experience (ABLE) Act of 2014 paved the way for these types of accounts, which allow individuals with disabilities to save money for qualifying disability-related expenses, including housing, personal support services, education, assistive technology, transportation, training and support for employment, and health and prevention.
The advantages of having an ABLE account are that the savings are tax-free, and the first $100,000 of money placed into an ABLE account does not count against the SSI or Medicaid asset limit. Family members can also gift your disabled child with funds to pay for expenses government benefits do not cover.
There are annual limits for contributions to ABLE accounts. The annual contribution limit for ABLE accounts in 2023 is $17,000. Employed beneficiaries can also contribute to their ABLE accounts. Employed ABLE account beneficiaries can contribute up to the lesser of the following two amounts:
- The poverty line for a one-person household
- The beneficiary’s salary for the tax year
Note that it is possible to set up both an ABLE account and a special needs trust.
As your disabled child enters adulthood, you may no longer be legally allowed to make medical care decisions on their behalf. You can continue to protect your adult child’s legal and medical interests by creating a guardianship for them.
A guardianship gives a guardian the right to act and make decisions on behalf of an incapacitated adult. If your child was born disabled or becomes disabled during childhood, your special needs estate plan should include establishing a guardianship. During your lifetime, you can act as a guardian for your child. You can also name a successor guardian to care for your child after you die.
Consult a special needs planner in your area if you are considering using any of these options. They can answer your questions about the advantages and disadvantages of each option so you can feel confident your child is protected.