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Articles Posted in Special Needs Planning

Estate planning for people with disabilities to protect inheritances or lawsuit proceeds while maintaining eligibility for public benefits like SSI and Medicaid.

For those who live in Colorado with a disability, or have a family member living with a disability, it will come as no surprise to hear that there are many hidden costs associated with disabilities. For example, an individual with a serious disability will likely have higher medical expenses, and may need assistance taking care of routine tasks. They may also need to pay for assistive devices or plan for modified transportation.

Medicaid helps many individuals living with disabilities to cover some of these costs. In addition, Supplemental Security Income (SSI) benefits provide individuals with monthly assistance. However, once a person is receiving Medicaid/SSI benefits, they must remain below specific asset and income levels. If a loved one provides cash to someone receiving SSI or Medicaid benefits, it can reduce the level of benefits and may result in benefit ineligibility. In practice, this makes it difficult for loved ones to provide any meaningful support, because doing so could jeopardize these benefits.

A Colorado special needs trust (SNT), also referred to as a supplemental needs trust, is an excellent way to provide support to someone with a disability without jeopardizing their benefits. An SNT can either be “self-funded” or opened by a third party. A third-party special needs trust is one opened by anyone other than the person who is named as the beneficiary. Funds that are transferred into an SNT do not count as “assets” for Medicaid eligibility purposes. The same goes for income that is assigned to the trust. Thus, family members can open a trust in the name of a loved one living with a disability, and can transfer money into the account for their loved one to use.

Raising a child who has special needs presents parents with many difficult choices and considerations. One of the most commonly encountered issues that parents face is how to provide for their child without affecting their needs-based benefits. An ABLE account may be the answer.

A person living with a disability incurs many costs throughout their life related to their disability. Indeed, it is estimated that, while the average cost of raising a child is approximately $233,000, the cost of raising a child with a serious disability can exceed $2.4 million. The government helps those experiencing disabilities through various public assistance programs, including Supplemental Security Income (SSI) and Medicaid. However, both SSI and Medicaid are needs-based programs, meaning that there are asset and income limits that must be met before an applicant can receive benefits. Historically, this has made it very difficult for family members to provide financial support to loved ones living with disabilities.

In 2017, Colorado joined many other states in offering a tax-advantaged savings plan for individuals living with disabilities. The program, entitled Coloradans Achieving a Better Life Experience (ABLE), allows account holders to save money in a tax-deferred status while keeping their needs-based benefits. In this way, an ABLE account is an additional tool that families can use in creating a comprehensive plan for a loved one living with a disability.

The federal government, through the Social Security Administration, has created several benefit programs to assist low income and older adults with their necessary living expenses. Those experiencing poverty or disability may qualify for Colorado disability benefits through various, food, healthcare, housing, and financial assistance programs. Two major healthcare benefit programs that individuals may be eligible for are Supplemental Security Income (SSI) and Social Security Disability Income Benefits (SSDI). While there are a few similarities between the two types of benefits, the differences between SSI and SSDI are crucial to understanding how to effectively engage in Colorado special needs planning.

There tend to be misperceptions about these programs because individuals apply for both benefits through the Social Security Administration (SSA). Further complicating matters, many individuals apply for both benefits simultaneously. However, there are key differences regarding eligibility based on a person’s earning history, income, resources, and age.

Supplemental Security Income is a needs-based program that provides financial assistance to disabled, low income, blind, or older adults. The program is funded through general tax revenues and not the Social Security trust fund. To qualify for SSI benefits, the individual must be at least 65 years old, blind, or disabled. Additionally, a single individual’s income cannot exceed $771 a month or $1,157 for a couple. Qualifying recipients will receive that amount per month in addition to the $25 Colorado state supplement.

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