By Thomas Rindahl, CFP
When your family members need special care, it is important to make sure that our loved ones have sufficient assets to last longer in life. But what happens when you try to assist someone? It always messes things up! You know that ancient saying, no good deed goes unpunished. This is especially true when it comes to special needs planning.
Many individuals will qualify for government assistance. However, if they inherit a substantial amount of change (big or small) it may inadvertently disqualify them from the government assistance they received. Here are a few strategies you can consider when it comes to managing your loved ones.
One option is the Special Needs Trust. There are three basic funding methods for the trust:
1) Self-settled: Money originated by the special needs person
2) Third-party: Someone else''s income is funding the trust.
Pooled: Funded by others and managed, generally, by a non-profit. This is a viable option for small estates or in the event there isn''t a clear choice for a trustee to administer the trust.
The individual with special needs is the beneficiary of the trust, but not the owner of the funds, thus avoiding problems that will result in him being disqualified from government support. This individual must be under age 65 when the trust is established.
It is essential to remember that you cannot use the money in a special needs trust for anything. There are restrictions for trust distributions. You may distribute funds to pay for medical expenses and dental expenses not covered by other benefits, such as groceries, public transportation, travel, clothing, education, insurance, legal services, burial expenses, vacations, and other expenses.
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The ABLE (Achieving a Better Life Experience) account was established in 2014 and has a tax-free savings account that may also be used to pay for individual expenses without affecting any other governmental support received. If the balance goes above $100,000, government benefits might be affected until the balance is reduced again. It also requires that the account''s beneficiary be under the age of 26 when disabled for the operation.
What happens when the beneficiary passes away? Any remaining funds in the self-settled and pooled special needs trusts and ABLE account will go to the government (and non-profit, in the case of the pooled special needs trust). The third-party special needs trust does not have this requirement.
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About the author: Thomas Rindahl
Thomas Rindahl, PhD, MBA, CLU, ChFC, CFP, LUTCF, BFATM, has served as a financial advisor in Tempe, AZ for over 20 years. Through extensive and holistic financial planning, he has helped his clients navigate the changing landscapes.
Securities offered by Securities America, Inc., Member FINRA/SIPC. Advisory services offered by PFG Advisors. TruWest Wealth Management Services, TruWest Credit Union, Securities America, and PFG Advisors are separate entities. Securities, insurance, and advisory offered by Securities America, PFG Advisors, but NCUA is not insured. No credit union guarantee. Not credit union deposits or obligations.