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Mind on Money: Planning for loved ones with special needs
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Mind on Money: Planning for loved ones with special needs

After my son Ethan was born with Down syndrome, I began to integrate financial planning for families with special needs individuals into my practice at Oak Partners. Over the past 11 years, I have continued to gain more and more experience with this type of specialized planning, and I am proud of the value my team is able to provide to families with special needs individuals.

Both the state and federal government, administered through the Social Security Administration (SSA) and Medicaid provide disabled individuals with a variety of life enhancing, and sometimes life sustaining, public benefits.

Public benefits can include health care and supplemental income, as well as resources to be used for supported living, day programs and other vital services. Some of these benefits are allocated based on the individual’s disability status, but others are also what is called “needs tested” to determine eligibility based on financial resources.

This needs testing is where much of the financial planning techniques are focused, as families need to be careful to avoid making rudimentary decisions that could have unintended consequences when it comes to continuing benefits eligibility for their loved ones.

In order to manage this risk, a variety of different planning tools can be utilized. I certainly understand the concepts and enjoy advising my clients on how to best plan for their loved ones. Until now, the work I was doing in this space seemed somewhat academic or even theoretical in nature, but this week the hypothetical was tossed out the window when one of my client families received a dreaded re-determination letter from the Social Security Administration. Re-determination is the process the government uses to review an individual’s continuing eligibility for benefits. The process has the potential to result in a rescission of benefits or even a pay back period if benefits were determined to have been allocated incorrectly.

The disabled individual in this case, an adult woman, lives in California, and I have been told the state is particularly aggressive regarding on-going benefits eligibility. During a periodic phone call between California Medicaid and the benefits recipient, she mentioned a trust created as a result of the estate planning done by her late father. This mention was enough to prompt an in-depth review of the planning, and the SSA has now requested 15 different items including estate documents, account history and review of disbursements over two years.

Needless to say, the process has created some stress for the family, and especially for the disabled individual. There will likely be some attorney’s costs as well, as the Indiana attorney who drafted the original trust will need to coordinate with a lawyer who is familiar with California procedures.

I reached out to my friend RG Skagberg at CCSK law in Valpo for some insight. According to RG, the special needs planning process required by Medicaid and SSA continues to evolve, and as a best practice, planning documents drafted even as recently as three or four years ago should be reviewed in the context of new developments.

As the re-determination process for my California client progresses, I am sure there will be much to learn. The planning for loved ones with special needs is not a “one and done” or static process. I will soon be sitting down to have my family planning documents reviewed. I would suggest families in similar situations consider doing the same.

Opinions are solely the writer's and are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing involves risk, including loss of principal. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.

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