Financial Planning for IDD Individuals

Financial Planning is an important step for all families and can be an intricate process. Planning for a family member with special needs or a disability, especially a developmental or intellectual disability, is even more complex.

The following information is not legal or financial advice but is compiled from various sources to provide some general ideas of steps you can take to prepare for your loved one’s future care. See the references at the end of this blog for more information and resources. Be sure to consult with your own financial advisor, attorney, tax planner, and other relevant professionals before making decisions or taking action.?

Traditional financial planning tools such as last will and testaments, retirement savings plans, insurance, estate planning, and tax planning all come into play but must be adapted to the needs of the family member with special needs. There are many factors to consider.

Parents may need to plan for their lifetimes as well as the lifetime of their IDD child (even if that child is an adult). If there are children both with and without disabilities, their future needs and therefore the planning will likely be very different.

Planning, especially for an IDD Individual, should start as early as possible – preferably at the time of diagnosis or prior to birth if the disability diagnosis is already known. This can be an emotional experience so don’t hesitate to seek professional mental health support for family members who are impacted.

You should consult experts including at least a financial advisor, attorney, and tax planner. One of them, perhaps the financial advisor, needs to coordinate pulling all the information together and insuring there are no discrepancies. If your IDD family member is eligible for support through Medicaid and state programs, as is the case in Colorado, each of these financial experts needs to be provided with all the details of those programs in order to plan within their areas of expertise such that the Individual remains eligible for these benefits.?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

Tips for planning for the future of your IDD loved one.

• Prepare a list of the specifics of any and all local, state, or federal programs and benefits, including Medicaid, that provide services and support to your loved one and the requirements for maintaining eligibility.
• Specify all physical and mental health therapies the Individual requires, whether they are ongoing, and whether they are covered by insurance. If not, note how they are paid for.
• Detail all out-of-pocket expenses that are necessary for the individual’s care and well-being. To meet these needs, your advisor will need to generate a plan to ensure sufficient cash flow.
• If a Health Savings Account (HSA) is available to the Individual, use it, and provide your advisor with the details.
• Have your advisor do an insurance analysis to determine what types of insurance may be needed. Ensure that the amount of life insurance you carry will cover any bills or debts you may leave and that it stretches to cover the needs of your loved one, especially if they are incapable of working long term, or not at all. Be certain you have the right type of life insurance. Whole life or universal life insurance typically continues as long as the premiums are paid whereas term insurance will expire.
• Estate planning includes typical documents such as a will, healthcare power of attorney, durable financial power of attorney, and when providing for a special needs family member, will likely include documents related to trusts. For special needs planning, language typically needs to be added to these documents that specifically addresses the individual’s situation. Your advisors should ensure that all provisions in these documents are written so that they don’t make the Individual ineligible for any government benefits.
• Consider opening an ABLE account, which offers savings programs for eligible people with disabilities. Distributed funds are tax-free when used for qualified disability expenses.
• Although it’s not a legal document, a letter of intent or letter of instruction may be one of the most important documents for your IDD Individual. This document would provide the named guardian with information that affects the IDD person’s quality and enjoyment of life, such as therapies and support, favorite foods, activities, and friends.

The Will and Special Needs Trust

It’s very important that the will is set up properly. It should, of course, clearly name the executor of the estate, who your personal property will pass to, and exactly where your assets are going to pass upon your death. For purposes of special needs planning, the will often specifies that the assets pass into a trust, which should be set up along with your will. Directing the assets into the special needs trust means that the assets do not become the individual property of the person with the disability. It should be stated in detail how the trust will be managed and by whom, including successors, should something happen that prevents the first-named trust manager from fulfilling their role.

The reason for assets passing directly to a trust is not necessarily based on the Individual’s ability to manage the funds, although that may be a factor. If the person’s assets reach a certain level, they may become ineligible for some of the local, state, or federal benefits or waivers for which they have previously qualified and rely on.

The will is not the last word on how some assets are transferred. IRAs and other retirement accounts are transferred based on named beneficiaries and the will may not override those designations. Be sure to get the advice of your financial advisor and/or attorney about how to direct these assets such that they do not disqualify the special needs family member from government benefits.

Family Communication is Essential

It’s not just parents that may be looking out for the welfare of special needs family members. Grandparents or other family members may sometimes set up accounts that are intended to benefit the special needs Individual or specify in their wills that some assets go to them. The intent is to help, but the result may be the opposite if the will or account is not set up appropriately. Even a gift to the Individual of several thousand dollars can disrupt immediate and future government benefits. Be sure everyone is clear on the goal to maintain benefits for the Individual and that all generations have the financial advisor and/or attorney assess their financial planning documents for that purpose.

Best advice – seek out a financial advisor and other experts that have experience working with special needs financial planning. Once your documents are complete, don’t file and forget about them. Have documents reviewed regularly, especially if there are changes in assets or family situations. Free financial planning resources are available from The Arc to help you get started.

With the right expert advice and preparation, you can feel confident that the needs of your IDD loved one will be met. Evergreen Service Providers can assist by providing a loving residential home in which they can thrive. Contact us to learn more.

The information contained in this blog is?provided for general informational purposes only and may not constitute the most current or most accurate information. It is not intended, nor should it be construed as advice on any subject matter. Contributors to this blog and website owners have no expertise in this area and disclaim any and all liability for any consequences that may result from readers’ or users’ decisions or actions based on its content, and do not endorse the content of referenced resources. Consult your legal, financial, tax, or medical professionals for advice.

?References:

• https://www.marinerwealthadvisors.com/insights/why-having-a-plan-for-those-with-special-needs-is-important/
• https://www.marinerwealthadvisors.com/insights/providing-financial-security-for-loved-ones-with-special-needs/
• https://www.investopedia.com/finances-for-people-with-disabilities-and-families-5217854
• https://www.forbes.com/sites/sergeiklebnikov/2023/04/30/special-needs-financial-planning-smart-advice-for-families-coping-with-disabilities/
• https://www.marinerwealthadvisors.com/insights/a-letter-of-instruction-providing-peace-and-comfort-to-your-loved-ones/
• https://www.irs.gov/government-entities/federal-state-local-governments/able-accounts-tax-benefit-for-people-with-disabilities
• https://www.coloradoable.org/
• https://www.healthcare.gov/glossary/health-savings-account-hsa/
• https://thearc.org/financial-planning-resources/
• https://www.specialneedsalliance.org/

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