Essential Tips from a Special Needs Financial Advisor

You want to build a solid foundation for your child’s financial future.

But you don’t know what you don’t know.

Too many families discover that there were steps they could have taken years ago to prepare for the financial needs of their child. If they had only known what to do.

Mike Butterworth is the parent of a young adult with special medical needs. For more than 25 years he has provided customized financial planning services to parents of children with disabilities.

In a recent interview, Mike stressed that financial planning is highly individualized. The unique needs and circumstances of each family must be taken into account.

Although this post can’t provide personalized guidance, Mike does offer important insights into topics that affect your child’s financial well-being.

Supplementary Security Income (SSI)

Supplemental Security Income (SSI) provides some financial resources for the needs of a person with a disability.

Children age birth to 18 can be eligible for SSI if they meet Social Security’s definition of disability for children and if their family has a low income and limited resources. Click here for details.

When a child turns 18, the family’s income is no longer considered in determining eligibility. Therefore, families should apply for SSI at age 18, regardless of family income.

The SSI definition of disability is somewhat different for adults than it is for children. Children receiving SSI before age 18 must go through a “redetermination of eligibility” at age 18. Redetermination of eligibility will also occur periodically for adults who receive SSI. If a person does not cooperate with the redetermination process, benefits end.

Often - families feel overwhelmed with the process of applying for SSI or going through redetermination of eligibility. Frequently, when families try to apply for SSI on their own - the application is at first denied and they find themselves needing to appeal.

Mike’s advice to families is - don’t go it alone.

Not all special needs financial planners have direct experience with the SSI application process, but Mike does. He has assisted many families in completing the online application and the in-person interview. Here are some of his tips:

• Address every question completely.
• Ask someone who has experience with the form to assist you.
• When answering questions about your child’s functional skills remember that the point is - can your child do the skill independently - without verbal or physical prompts or special accommodations?
• Mention ALL of your child’s special needs (medical, psychological, functional, educational, etc.) and bring documentation of all diagnoses (from physician, psychologist, etc.) with you to the in-person interview.
• Ask someone with experience in the SSI process to accompany you to the in-person interview

Medicaid

Medicaid is literally a lifeline of funding for services that your child may need now and in the future.

Too many families think that Medicaid isn’t needed if their child is covered by the family health insurance policy.

This is a serious misunderstanding.

Mike emphasizes that many services your child will need are not covered fully - and may not be covered at all - by your family’s health insurance policy. For example - services like job coaching, specialized therapies, and in-home supports are Medicaid funded.

Mike has worked with many families who were unable to access needed services for their child because they had never applied for Medicaid - or they had allowed coverage to lapse by not responding promptly to notices requesting updated information.

Don’t let this happen to you!

As with SSI - it is best not to try to navigate Medicaid alone.

The procedures for Medicaid funding of services vary by state.

There are often long waiting lists for “Medicaid waivers” that fund adult services - so planning ahead for the future is critically important.

How can you find someone who can help you understand how to apply for Medicaid and negotiate the process of accessing Medicaid waivers in your state?

A good place to start is your local Arc or Center for Independent Living.

You can also contact the local chapter of a disability-specific advocacy organization (such as the Autism Society, NAMI, or United Cerebral Palsy ).

Don’t stop until you’ve found a knowledgable person who has experience successfully navigating the Medicaid and SSI systems. There is no need to go it alone.

Special Needs Trust

A person receiving SSI is limited to personal assets of $2,000.

Mike says that too often well-meaning family members bequeath money or property directly to a person with a disability and unintentionally interfere with that person’s SSI benefits.

A Special Needs Trust (sometimes called a Supplemental Needs Trust) enables an unlimited amount of resources to be held in trust for the benefit of a person with a disability - without affecting eligibility for SSI or other government benefits.

Property as well as cash assets can be held in a Special Needs Trust.

The Last Will and Testament of anyone who wishes to leave property or cash to your child should name the Special Needs Trust - NOT the child - as beneficiary.

There are financial planning as well as legal considerations in setting up a Special Needs Trust.

Mike explains that often an attorney will help a family to set up the Special Needs Trust and the Last Will and Testament - but the attorney does not alert the family to important financial planning considerations. Simply because this is not an area with which most attorneys are familiar.

To maximize income and avoid unnecessary taxes, you should work with a financial planner to manage the funds that will eventually be bequeathed to your child’s Special Needs Trust.

Establish a Rental Agreement

If your adult child with a disability lives with you, it is important to prepare a Social Security Affidavit that is, in effect, a rental agreement. Without this affidavit, your child’s SSI benefits will be reduced.

The affidavit specifies the amount that your child is being charged by you for rent. This amount should be aligned with the amount you would charge someone else to rent a room in your home. The affidavit should also state that collecting rent as stated in the agreement is necessary in order for your adult child to live in your home. By completing this affidavit, your child will be eligible for full benefits.

Mike explains that he has helped many families to do this - and it has made all the difference in enabling them to meet monthly expenses without having to dip into savings that will eventually be bequeathed to their child’s Special Needs Trust.

Disabled Adult Child Benefits

When the primary wage earner of your family reaches the age of 65 and begins to collect Social Security benefits, an adult child with a disability is eligible for Disabled Adult Child (DAC) benefits. You must apply for DAC benefits - it is not an automatic process.

Just as a spouse who did not work much outside the home is eligible for Social Security spouse benefits, an adult child with a disability can receive monthly DAC benefits that amount to close to half of the monthly benefit of the family’s primary wage earner. The DAC benefits are in addition to SSI benefits. Of course, your adult child cannot accrue more than $2,000 of savings while receiving SSI.

Many people are not aware of DAC benefits. Mike advises looking into them before you reach age 65.

Learn More

We’re grateful to Mike for these important general tips. But nothing replaces an individualized financial plan that is tailored to your family’s needs. Consult with a qualified special needs financial planner. Local advocacy organizations can tell you about reliable professionals in your area.

Full Disclosure - I received no reimbursement of any kind for writing this post or linking to Mike’s website.

Mike, who is very active in supporting the disability community in our area, volunteered to provide information for this post.

Mike is located in Pennsylvania. He can be contacted here.

Your Turn

We’d love to hear about your financial planning tips, questions, and experiences. Please share them in the comment section below.

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Image Credits: 401(K) 2013 at Flickr, the Arc of the United States, and MP Butterworth & Associates