As a parent considering the future life of your son or daughter with a disability, you may have been inspired by shows like The Specials (www.the-specials.com) or Born this Way (www.youtube.com/watch?v=T_ygHNl8wcg) that show young adults with disabilities living full, independent, and complex lives with support from their families, friends and professionals. You appreciate these results, but the real questions you want to ask are, “How did they get here? What did it take?” These are the questions that I help families answer when we go through the process of creating a comprehensive future financial plan for the family member with a disability. These are the steps we take.
Defining the Vision
People with disabilities do not have “special needs”. They have the same needs as everyone else, but they may require additional support to meet those needs. The first step in creating a financial plan for your family member with a disability is developing a vision for that person’s future life. If your family member is old enough to participate, then they should be a defining voice in developing the vision. This vision for the future should describe the following aspects of life:
- Residence. Where would your family member like to live? In a single-family home with a yard? In a townhome or condominium community with amenities like a clubhouse, pool, or exercise room? Would your family member prefer to live alone, or with roommates, or does he or she expect to have a romantic partner or get married? Does your family member need housing that allows pets? Does your family member prefer a downtown location or a suburb? Is it important to your family member to be in a quiet area? An area with a lot or parks and green spaces?
- Employment. Does your family member want and expect to work? Part-time or full-time? One job or more? Paid, or as a volunteer? In what type of occupation? Will your family member require support? Initial support that fades away, or ongoing support through their whole working life?
- Recreation and exercise. What does your family member do for fun? Do they need to be near the “Y” or a certain health club? Near a bicycle trail or a hiking or running path? Does your family member need access to a park district with tennis courts or a pool? Do they want easy access to movie or live theater, shopping, museums, the zoo, or other local attractions? Do they have friends in the current neighborhood and need to stay close to them?
- Community. Where does your family member find their place of belonging? Is faith community important? Recreational team sports? Clubs or activity leagues? Do they need to live on campus or close to work to participate in after-hours activities?
- Transportation. Does your family member walk or bicycle to their activities? Do they need to be near public transportation or in an area readily served by ride-share drivers?
Forecasting Cost
Once we have described all the components of your family member’s desired life, we research and assign a monthly or annual cost to each one. We look at the cumulative expenses your family member will have this year, next year, and every year for the rest of his/her life. We stop and start costs as your family member goes through successive life changes. For example, in young adulthood, your family member may spend more on continuing education, travel, and recreational activities with friends. As your family member gets older, they may need to spend more on medical treatment.
Identifying Resources
Once we know how much your family member will need to spend each year to maintain their chosen lifestyle, we match that against the income streams your family member will have. If your family member is expected to work, we calculate hours and expected hourly wages or salary and consider money directed towards retirement or other savings. We consider whether the person may take on more hours and/or move into a higher-paying position as their experience and tenure increase. And of course, we consider that, like the rest of us, the person with a disability will need to retire from work at some point.
Social Security benefits are a cornerstone of financial stability for many people with disabilities. We examine the eligibility criteria for Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) that your family member may earn on their own work record, and the so-called “Childhood Disability Benefits” (“CDB”) or “Disabled Adult Child” (“DAC”) benefits that your family member may qualify for on the work record of their parents if the member’s disability started before age 22. Many people with disabilities will become eligible for more than one of these benefits, sometimes simultaneously, and some people will eventually move through all of them.
People with disabilities who receive SSDI on their own work records or a CDB/DAC benefit will become eligible for Medicare after 24 months. Medicare can cover a range of health care costs, particularly when paired with Medicaid. In addition, if your family member will need a personal care attendant or direct support worker to provide daily living or employment supports, Medicaid may cover much of those cost through Medicaid waiver-funded programs.
A person with a disability may also be eligible for low-income housing subsidies, utilities assistance, local property tax exemptions, and the Supplemental Nutritional Assistance Program (SNAP, formerly known as food stamps). The financial plan looks at how to maximize these benefits over the person’s lifetime.
Filling the Gap
A person’s work income plus Social Security and other government benefit streams will a portion of their expenses. Unless the person is able to work full-time for a living wage and still qualify for a Medicaid waiver program that pays all necessary support costs, there is almost always a gap in the plan between the total annual expenses and the cash inflow to cover them. At this point, we consider the amount of assets the person will need to draw upon over the course of their lifetime to fill that gap. These assets may be owned by the person her/himself in the form of retirement or investment accounts. Of course, it is important to understand how owning such accounts may limit the person’s eligibility for the very government benefits that could contribute to income and to consider assets such as ABLE accounts, which are not considered in an eligibility determination. If the family member with a disability has received an inheritance or a settlement of significant size, it may be necessary to create and fund a first-party special needs trust to permit the person to set aside those funds for supplemental needs while accessing government benefits to cover primary needs.
Parents, grandparents and others may also want to fund a third-party special needs trust, which can provide supplemental support to the family member with a disability without disrupting their benefits. An essential part of the comprehensive planning process is determining the least risky and most cost effective, tax efficient way to fund such a trust.
Keeping Current
The final step of the planning process is iterative. Sometime into the plan, the person with a disability may find a better job. Alternatively, they may be laid off. The person may want to move or take on a new activity. They may have found a romantic partner or different roommates or decided that they want to live alone. The person’s health may have improved or worsened compared to the expectations we set at the beginning of the process. For the plan to be both realistic and effective, it must be updated as the life of the person with a disability changes bringing corresponding changes in their income and expense and as the outside environment changes, causing changes in the value of assets and the rules governing their ownership in relation to government benefits.
The goal of a comprehensive financial plan for your family member with a disability is to make sure that has the financial resources needed to support the life they want AND that those resources are secure and dependable even when life takes the inevitable twists and turns away from your initial expectations. Understanding the process is the first step towards making it work.
The goal of a comprehensive financial plan for your family member with a disability is to make sure that has the financial resources needed to support the life they want AND that those resources are secure and dependable even when life takes the inevitable twists and turns away from your initial expectations. Understanding the process is the first step towards making it work.
ABOUT THE AUTHOR
Alexandra Baig, MBA, CFP® is a fee-only financial planner and an employment network service provider who helps people with disabilities make the most of government benefits and personal resources to support their work and life goals. Alexandra has previous experience running L’Arche Chicago, an innovative residential community for people with and without disabilities.
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