An Overview of Special Needs Planning
What is special needs planning?
Special Needs Planning encompasses the following:
Allowing personal autonomy with protections
Maximizing govemment benefits
Health insurance planning
Job, social, and communal planning
Minimizing taxes
Planning for adulthood
Planning for improvement or deterioration
Planning for death
Coordination with your overall estate plan
When Do I Need to do Special Needs Planning?
While every person is different, there are a few “age markers” that require special attention in the context of special needs planning. The following ages are significant for a child or family member with special needs:
- Age 18: “deeming” for purposes of SSI ceases and any childhood benefits convert to SSDI, which starts the 25-month clock for Medicare coverage (not Medicaid)
- Age 19: the person is a legal adult. The Doctor stops asking the parent or guardian about the person, and looks to either the person or a legal surrogate.
- Age 22: The Person can obtain Disabled Adult Child Social Security Benefits (up to 50-75% of worker’s social security benefit)
Government Benefits
Government Benefits
| Benefit | Benefits Description | Basic Eligibility |
|---|---|---|
| SSI | Cash (up to 1914 per month) and Medicaid health insurance | No more than $2,000 in "available resources" and a more complex income limit |
| SSDI | Cash | Requires substantial work history based on age |
| Social Security Dependent & Survivor Benefits | Cash | Age 18 or over and disabled before age 22; working parent must be receiving social security retirement benefits |
| VA Benefits | Cash; healthcare | Varies |
| SNAP | Food stamps | If a disabled person lives alone and receives SSI, they are automatically eligible for SNAP |
Too Many Assets for Government Benefits? What About Inheritances? Consider a Special Needs Trust.
Special Needs Trusts allow a beneficiary with special needs to use money in the trust to help them live the best life they possibly can. Anyone can create a Special Needs Trust (“SNT”) including the beneficiary themselves, a parent, grandparent, or other relative or friend. Special Needs Trusts are usually designed so that a beneficiary can receive the benefit of assets without having those assets be considered “available resources” for the purpose of receiving government benefits, allowing the beneficiary to get the “best of both worlds.”
While there are many different kinds of SNTS, every SNT is either a First Party SNT or a Third Party SNT. Below is a comparison between these 2 types of SNTS:
| First Party Special Needs Trusts | Third Party Special Needs Trusts | |
|---|---|---|
| Who can create the trust? | The beneficiary themselves, a Court, a Parent, Grandparent, or Guardian/Conservator | Anyone other than the beneficiary themselves |
| Who can add money to the trust? | The beneficiary themselves | Anyone other than the beneficiary themselves |
| Who can be the beneficiary? | Any person declared "disabled" by the SSA and under the age of 65 (with some exceptions) | Anyone |
| Revocable or irrevocable? | Irrevocable | Can be either revocable or irrevocable |
| Medicaid payback provision required? | Yes | No |
| Who pays the taxes? | The beneficiary or the trust | Can be either the Trustmakers, the beneficiary, or the trust |
What About Taxes?
- Special Needs Trusts can allow for tax savings that many families do not know are possible. Some of these tools are listed below. Unique Tools for Significant Tax Savings for Special Needs Beneficiaries:
- “Qualified Disability Trust’ status
- Trustee discretion to allocate income
- Provision in a SNT that allows the SNT to pay the beneficiary’s tax liability for them (which may allow less tax to be paid) while also maintaining eligibility for government benefits
- Ability to use the beneficiary’s life expectancy to save on taxes owed from qualified assets, such as IRAs and 401(k)s
Other Tools in the Special Needs Planning Toolbox: Powers of Attorney, Guardianships, Conservatorships, Supported Decision-Making, and ABLE Accounts
Powers of attorney allow a person to speak, sign and act for them if they cannot do so for themselves. A person must have the requisite legal capacity to sign a power of attorney, the discretion of which is in the purview of a special needs planning attorney. A guardianship or conservatorship is similar, except the person’s rights to speak for themselves are cut off in these proceedings. Additionally, guardianships and conservatorships are public legal proceedings, and they can be costly, time-consuming, and, in some unfortunate cases, publicly contested in court.
Supported decision-making is a very new development in special needs law that empowers individuals with special needs to make their own decision on matters they are capable of handling, while allowing other individuals (often called “supporters”) to help them make and communicate those decisions.
Supported decision-making is a very new development in special needs law that empowers individuals with special needs to make their own decision on matters they are capable of handling, while allowing other individuals (often called “supporters”) to help them make and communicate those decisions.
Power of Attorney vs. Supported Decision-Making vs. Guardianships and Conservatorships:
| Power of Attorney | Supported Decision Making | Guardianship/Conservatorship | |
|---|---|---|---|
| Autonomy to individual | High | Maximally high | Low to zero |
| What areas can it cover? | Health care, finances, housing. and more | Health care, finances, housing. and more | Health care, finances, housing, and more |
| Capacity of the protected person needed | Relatively high | Relatively low | None |
| How widely accepted by banks, health providers, etc.? | High | Unknown; very new to Alabama | High |
| Financial cost | Low | Low | High |
Power of Attorney vs. Supported Decision-Making vs. Guardianships and Conservatorships:
| Pros | Cons |
|---|---|
| Power of Attorney | Medicaid Payback provision required |
| High | Maximally high |
| Health care, finances, housing, and more | Health care, finances, housing, and more |
| Relatively high | Relatively low |
| High | Unknown; very new to Alabama |
| Low | Low |
This Guide is just the beginning! For a more in-depth discussion on Special Needs planning in Alabama, check out our free article, “Special Needs Planning in Alabama: A Deep Dive”, available to you for free! Just call or email our office to get a free copy.
