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Special-needs financial planning
Five things to consider when families plan for a member with a disability
By Amy Hoak, MarketWatch
Last Update: 7:52 PM ET Dec 12, 2006
CHICAGO (MarketWatch) -- Dee and John Reeves wish they had started planning sooner. Their 35-year-old son, Sean, has Down syndrome. When he was younger, the family's financial planning often took a back seat to his more immediate needs.
"Like most people, you go day to day and just try to get by," Dee Reeves said. It wasn't until Sean turned 21 that the Antioch, Ill., family started to create a more focused financial plan.
Their story isn't uncommon, says Mary Anne Ehlert, a financial planner and president of Protected Tomorrows, an advocacy firm that helps the families of those with special needs plan for the future. "The number of people who have not done any planning is enormous," she said.
And yet, proper financial planning is important in securing a better quality of life for an individual with a disability -- as well as the family around them.
It's a subject Ehlert has dealt with both professionally and personally -- her late sister had cerebral palsy. Through her organization, Ehlert is training and licensing financial planners and other professionals to help families like hers.
"I can somewhat put myself in the shoes of clients, but everyone is different," she said.
Parents who learn their child has a disability at birth have a different experience than those who discover that a college-age child has a disability that needs to be planned for, she said. Needs of adults are different still.
Regardless of a family's situation, those who need to consider a disabled individual in their planning would do right by considering five steps in organizing their finances.
1. Take a candid look at the future needs of all family members
Look comprehensively at the disabled family member's special needs as well as the future needs of the entire family.
For example, parents need to plan for their retirement, a task Ehlert compared with "putting your oxygen mask on first on the airplane." And planning for the educational needs of other children in the family is just as important, she added.
"Parents count on the other children to be there in the future for the sibling with a disability, so they want to make sure all of the other children get a good start on life," she said.
Granted, this kind of planning can be overwhelming.
"People have all these things going on in their minds, but they don't know how to sort it out and get on track," said Constance A. Stone, a financial planner in Chagrin Falls, Ohio. "If they can identify the issues they want to address," she said, with help they can develop a plan of action.
2. Select a team to help and support
Special-needs planning can be complicated, and families may want to work with professionals including attorneys, financial planners and social workers.
The most important question to ask a professional in this case is if he or she has done special-needs planning before, Ehlert said. Follow-up questions may include "Have you worked with a family like mine before?" and "What is your personal experience with special needs?"
A professional who has gone through the process of special-needs planning before will be more knowledgeable on the topic and better equipped to guide families to resources.
"Most people who are involved in this typically have a passion for it and a lot of them have been touched in their personal lives in one way or another," Stone said.
3. Capture potential benefits
Social Security Disability, Supplemental Security Income, Medicare and Medicaid -- all are examples of the help that is out there for individuals with special needs. Other programs that vary by state are there to help too.
Some people "stick their heads in the sand" and think they can finance a special-needs family member on their own, Stone said.
But often when a caregiver ages and eventually dies, those services are going to be essential for a person who can't fund all of their expenses. And -- important to families at all income levels -- sometimes qualifying for government help is a requirement for entry into other programs, Ehlert said.
4. Consider a special-needs trust
To make sure that government benefits are retained -- even after the caregiver dies and can leave funds through their estate -- many families create a special-needs trust.
Through a special-needs trust, inheritance funds are not left to the disabled loved one; leaving money in his or her name could disqualify an individual for government benefits. Another potential problem with leaving funds to a disabled heir: If the individual already received a Medicaid benefit, part of the inheritance left in his or her name may need to be used to pay the state back, Ehlert said.
Instead, through a special-needs trust a selected trustee manages the funds and can make purchases of items on the disabled individual's behalf.
A caveat: The funds in a special-needs trust only can be used for supplemental care, items beyond what the government provides for, Ehlert said. The money can provide for extras to enhance someone's quality of life, including vacations, recreation, education and personal-care attendants, according to attorney Stephen Elias, author of "Special Needs Trusts: Protect Your Child's Financial Future," published by Nolo.
"Most people want their child to inherit their money and get use of it while keeping their medical benefits," Elias said. It's also important that the trustee is well informed of the parameters regarding use of the funds, he said.
5. Review annually
Situations and goals change, so Ehlert advises reviewing the plan every year and updating if necessary. She also advises keeping a handbook in order to help future caregivers.
"Those of us with family members with special needs know that when the person came into our life, they did not come with a handbook of what to do. We learned what to do over a long period of time," she said.
For more information, visit the Protected Tomorrows Web site at http://www.protectedtomorrows.com/.
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