Retirement planning for special needs families

Estate planning. Creation of a Special Needs Trust is a critical element of a solid family retirement plan. The trust becomes the vessel for assets that will be used to pay for a child’s needs in the future, and the vehicle for managing the assets. Ehlert urges caution in picking a trustee. Although some banks offer this service, they tend to come in and out of the business depending on their own strategic interests. She usually refers clients to companies that specialize in trust services; estate planning attorneys and planners usually can recommend a reliable provider.

Beneficiary structure. Handled improperly, inheritances can jeopardize government benefits. Making sure that beneficiaries are structured properly in an estate plan is a must.

Quality planning is complicated; wherever possible, families with special-needs children should consult attorneys and financial planners with expertise in the field, Ehlert says.

But let’s drill down on three areas–government assistance, personal saving, and investing–and the less tangible area of planning with other family members.

Government Assistance

Government assistance typically begins with Supplemental Security Income benefits from Social Security. Children disabled from birth up to age 18 can receive SSI if their parents meet the program’s low income and asset requirements. At age 18, they can qualify for SSI on their own; the maximum benefit in 2017 is $735 per month.

In most states, SSI recipients automatically qualify for Medicaid, which pays for a range of healthcare services. But Medicaid is jointly funded by states and the federal government, and many states are facing severe financial strains in their Medicaid programs and are cutting back services. Moreover, President-elect Donald Trump and some in Congress have called for converting Medicaid to a block grant program, placing a fixed ceiling on federal outlays. That would create new funding gaps for states, likely leading to more program limitations. (Special-needs experts advise that even a family with financial resources may find that a disabled or special-needs child can qualify for Medicaid, and should always apply.)

Social Security Disability Insurance is an important benefit for special-needs families. SSDI pays benefits to adults with disabilities that began before they turn 22 years old. It is considered a “child’s” benefit because it is paid on the parent’s Social Security earnings record. The benefit is 50 percent of the parent’s primary insurance amount–the amount he or she would receive at full retirement age. If the parent is deceased, the survivor benefit is increased to 75 percent of PIA.

But the decision to file for SSDI needs to be considered in a broader family claiming context. That’s because SSDI is available for the child only if one of the parents is receiving Social Security retirement of disability benefits, or if a parent is deceased. That brings into play a number of computations about optimizing a family’s overall Social Security income, and questions about the best time for a parent to claim benefits.

For a married couple, much depends on the ages of both spouses, whether they are working and other complex factors.

Laurence Kotlikoff

“It’s important to look at the family’s benefit joint value,” says Laurence Kotlikoff, a professor economics at Boston University and co-author of Get What’s Yours: The Secrets to Maxing Out Your Social Security (Simon & Schuster, 2015). Kotlikoff and his co-authors include an excellent discussion of scenarios that would affect a claiming decision for parents of a child with a disability.

Kotlikov also is the creator of Maximize My Social Security, a software program that helps households create Social Security claiming strategies based on their individual circumstances; the program includes features that looks at an entire family’s benefits and present a claiming strategy based on optimal joint present value. Total family benefits also are capped by a maximum family benefit; the amount available for a family can be found on annual Social Security statements.

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