Health & Medicine - County Woman Newspapers

Mercer County Woman
Business & Finance
Getting the Most for Those Who Need It Most
Steven Rodriguez
Amidst rising healthcare
costs and rigid public-aid
requirements, special-needs
trusts can enrich the lives of
your disabled loved ones.
Here’s the lowdown on
what you need to know.
The facts and figures are
staggering: nearly 54-million
people in America cope
with special needs and the
rising expenses related to
some form of disability—
whether cognitive, developmental
or physical—
according to the National
Organization on Disability.
The rise in cases of certain
disabilities may be on the
verge of creating a national
health crisis. Autism, for
one, drains the economy of
$35 billion a year according
to a recent Harvard School
of Public Health study. The
Harvard research also indicates
that the lifelong bill
for one autistic individual,
from birth until death,
could reach as much as $3.2
million. What’s more, individuals
with special needs
relying on government
assistance alone—such as
Medicaid and Supplemental
Security Income—often
live near the poverty level
in the absence of additional
income from their family,
community or other
loved ones.
Despite these alarming
numbers, once a disability is
diagnosed, early planning
helps families add to and
protect the assets of a special-needs
individual, preventing
the loss of critical
benefits. One effective way
to protect a loved one is
through a special-needs
trust. “It’s the most popular
planning tool,” according to
Vincent J. Russo, cofounder
of the Academy of Special
Needs Planners and a special-needs
estate attorney.
To Preserve and Protect
Special-needs trusts
were created to manage
resources while protecting
an individual’s eligibility for
vital public assistance.
Establishing an SNT may
also prevent court intervention
by eliminating the
need to appoint a guardian
to manage the disabled
individual’s assets. SNTs are
designed to pay for items—
such as education, alternative
therapies, counseling
and vacations—which go
beyond the simple life
expenses covered by government
benefits.
There are two basic
types of SNTs: the thirdparty
special-needs trust
and the first-party specialneeds
trust. Third-party
SNTs commonly are created
by a parent or other family
member for a child with
special needs—though the
child may be an adult when
the trust is created or funded.
These SNTs require no
government paybacks and
allow the beneficiary to
receive gifts, lawsuit settlements
or other funds
without losing their eligibility
for certain government
programs.
When the disabled individual
establishes the trust
for himself, it is referred to
as a first-party or self-settled
SNT. These SNTs permit
the disabled person to
protect his or her assets
from creditors and can help
to reduce total assets for tax
or Medicaid planning
purposes. Three types of
first-party trusts exist. Payback
trusts are available for
disabled individuals under
age 65 and require payback
for government assistance
upon the death of the disabled
individual. Secondly,
qualified-income trusts are
funded solely by an individual’s
income—such as a
pension or social security.
They have no age or disability
restrictions, but require
government paybacks.
Lastly, not-for-profit pooled
trusts have no age or government
payback requirements
if the amounts remaining at
the disabled beneficiary’s
death remain in the trust for
the benefit of other disabled
beneficiaries.
One very important fact
to remember: it is critical to
plan for the SNT before the
disabled individual receives
assets in his or her own
name. Many parents incorrectly
assume that their
children qualify for government
benefits simply
because they are disabled.
The eligibility for government
benefits is based on
their parents’ income and
assets. However, when
these children reach a certain
age (usually 18), eligibility
is based primarily on
their own income and assets
rather than those of their
parents. If the disabled person’s
assets (excluding certain
items, like a home or
car) exceed $2000, the government
will discontinue
benefit payments until any
extra money has been
accounted for.
Where to Turn
When it comes to funding
your SNT, first assess
your savings goals for lifetime
care expenses. The
Academy of Special Needs
Planners offers useful calculators
and checklists on its
Web site, www.specialneedsanswers.com.
You
may also want to hire a lifecare
planner to develop a
comprehensive assessment
of current and future care
needs and make recommendations.
Life insurance is
often the best source of
SNT funding. It requires a
smaller initial outlay and
the proceeds are received as
tax-free income and often
as a tax-free estate. When
there are two parents, survivorship
life insurance is
the most popular funding
choice because it is usually
the least expensive. SNTs
also can be funded with
proceeds obtained by the
beneficiary through court
proceedings, inheritances,
life insurance claims, settlements
or gifts.
When it comes to special-needs
care, government
assistance only goes so far.
That’s why early planning is
essential. Speak to a Smith
Barney Financial Advisor
about planning for specialneeds
care.
◆ ◆ ◆ ◆
Steven Rodriguez is a
Financial Advisor with
Smith Barney located
in Lawrenceville, NJ and
may be reached at
(609) 538-4832.
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SIPC.
33 March / April 08