How Do You Provide Financial Help for a Special Needs Child and Retirement Too? – Annapolis and Towson Estate Planning

For parents of children with disabilities, the challenges of preparing for retirement and for their child’s future are far higher than for families with healthy, high-functioning adults. Planning for your own retirement, while needing to secure the stability and basic needs of a child who will be a dependent forever often feels impossible, according to the recent article “Planning for Your Retirement, and for a Child’s Special Needs, All at Once” from The New York Times.

Even under the best of circumstances, where there’s plenty of money available and many hands to help, caring for an adult child with special needs is emotionally and physically challenging. As parents age, they have to address their own needs plus the needs of their adult dependent. Who will provide safe and comfortable housing and care for them when their parents no longer can?

Understanding the entire picture can be difficult, even for parents with the best of intentions. First, they need to understand how their retirement planning must be different than other families. Their investments need to be multi-generational to last not just for their lifetimes, but for their child’s lifetime. They can’t be too conservative because they need long-term growth.

In addition, special needs parents need to keep a certain amount of funds liquid and easily accessible, for times when their child needs a new piece of expensive equipment immediately.

One of the parents will often leave the workforce to provide care or take a lower paying position to be more available for care. This creates a double hit; the household budget is reduced at the same time its strained by costs not covered by benefits or insurance. Paying for gas to drive to therapy appointments and day programs, buying supplies not covered by insurance, like adult diapers, waterproof bedding, compression garments to promote circulation, specialized diets, etc. adds up quickly.

Even with public health assistance, finding affordable housing is not easy. One adult may need supervised care in a group home, while others may need in-home care. However, the family home may need to be modified to accommodate their physical disabilities. With wait times lasting several years, many families feel they have no choice but to keep their family member at home.

Another challenge: if the parents wanted to downsize to a smaller house or move to a state where housing costs are lower, they may not be able to do so. Most of the public benefits available to special needs people are administered through Medicaid at the state level. Moving to a state with a lower cost of housing may also mean losing access to the disabled individuals’ benefits or being placed at the end of the waiting list for services in a new state.

For disabled individuals, maintaining eligibility is a key issue. Family members who name a disabled individual as a beneficiary don’t understand how they are jeopardizing their ability to access public benefits. Any money intended for a disabled person must be held in a specialized financial instrument, such as a special needs trust.

The money in a special needs trust (SNT) may be used for quality-of-life enhancements like a cellphone, computer, better food, care providers, rent and utilities among other qualified expenses.

There are two main categories of SNTs: first party trusts, created with assets belonging to the individual. Any money in this trust must go to reimburse the state for the cost of their care. Another is a third-party special needs trust, established and funded by someone else for the benefit of the disabled individual. These are typically funded by parent’s life insurance proceeds and second-to-die life insurance policies. Both parents are covered under it, and the policy pays out after the second spouse dies, providing a more affordable option than insuring both parents separately.

Contact us to schedule a time to speak with one of our experienced estate planning attorneys to develop a plan for your special needs child’s future as well as for your retirement.

Reference: The New York Times (Aug. 27, 2022) “Planning for Your Retirement, and for a Child’s Special Needs, All at Once”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Medicaid Crisis Plans for Long Term Care Costs – Annapolis and Towson Estate Planning

To the estate planning attorney, the situation is known as “crisis planning.” It almost always involves two things happening at once: the immediate need for additional healthcare and for a family’s assets to be protected. The end goal of crisis planning is to protect assets for both spouses, while ensuring that the sick spouse receives the care they need, as explained in the article “Crisis planning for couples focuses on asset protection” from The News-Enterprise.

What is Medicaid Crisis Planning?

Crisis planning for married couples requires a three-step process. First, does the spouse in crisis have the documents in place to allow another person to act on their behalf? This includes a financial power of attorney and a healthcare power of attorney.

Powers of Attorney need to be checked to ensure that they include specific powers needed to take action on the person’s behalf. These documents are “state specific,” meaning each state has laws determining what the POA must contain and how it must be prepared. Crisis planning requires a POA providing a broad set of powers, so agents can access and change documents like deeds, bank and investment accounts.

Once the documents and POAs are in hand, the next step is to get a detailed breakdown of the couple’s financial position and the cost of care. This becomes easier if the couple is organized and has information readily available for each income stream and asset.

What Information Will the Agent Need?

The agent must find several different types of financial documents. Proof of income for each income stream is needed. The actual proof of income will show taxes withdrawn or other deductions taken from income, such as health insurance.

The agent will also need access to several months of statements for each account, including bank statements, investment accounts, retirement accounts and deeds and titles for property. Proof of other assets, including insurance policies, burial plot deeds and other assets must also be included.

Some types of income and assets are countable, and some are non-countable. However, the non-countable income and assets may need to be considered, so the estate planning attorney will need to have all the information.

Medicaid Resource Assessment Request

Step three is to determine eligibility for programs and make the necessary applications. This will depend on the type of care needed. However, a typical crisis case is for nursing home care, which almost always means Medicaid eligibility. All income and assets are reported to Medicaid through a Resource Assessment request. The Medicaid office creates a breakdown of what will be counted against the applicant.

The remaining amount is what must be “spent down” for a person to be eligible for Medicaid coverage.

The most common way to do this is through a Medicaid Annuity. This annuity takes the spend down amount and returns the full amount as income to the spouse at home, effectively preserving the couple’s assets.

Crisis planning is stressful but does not have to be hopeless. By working with an experienced estate planning attorney and providing documentation as quickly as possible, health care needs can be met without the well spouse being impoverished.

Reference: The News-Enterprise (July 23, 2022) “Crisis planning for couples focuses on asset protection”

 

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Must I Sell Parent’s Home if They Move to a Nursing Facility? – Annapolis and Towson Estate Planning

If a parent is transferring to a nursing home, you may ask if her home must be sold.

It is common in a parent’s later years to have the parent and an adult child on the deed, with a line of credit on the house. As a result, there is very little equity.

Seniors Matter’s recent article entitled “If my mom moves to a nursing home, does her home need to be sold?” says that if your mother has assets in her name, but not enough resources to pay for an extended nursing home stay, this can add another level of complexity.

If your mother has long-term care insurance or a life insurance policy with a nursing home rider, these can help cover the costs.

However, if your mom will rely on state aid, through Medicaid, she will need to qualify for coverage based on her income and assets.

Medicaid income and asset limits are low—and vary by state. Homes are usually excluded from the asset limits for qualification purposes. That is because most states’ Medicaid programs will not count a nursing home resident’s home as an asset when calculating an applicant’s eligibility for Medicaid, provided the resident intends to return home

However, a home may come into play later on because states eventually attempt to recover their costs of providing care. If a parent stays a year-and-a-half in a nursing home—the typical stay for women— when her home is sold, the state will make a claim for a share of the home’s sales proceeds.

Many seniors use an irrevocable trust to avoid this “asset recovery.”

Trusts can be expensive to create and require the help of an experienced elder law attorney. As a result, in some cases, this may not be an option. If there is not enough equity left after the sale, some states also pursue other assets, such as bank accounts, to satisfy their nursing home expense claims.

An adult child selling the home right before the parent goes into a nursing home would also not avoid the state trying to recover its costs. This is because Medicaid has a look-back period for asset transfers occurring within five years.

There are some exceptions. For example, if an adult child lived with their parent in the house as her caregiver prior to her being placed in a nursing home. However, there are other requirements.

Talk to an elder law attorney on the best way to go, based on state law and other specific factors.

Reference: Seniors Matter (Feb. 25, 2022) “If my mom moves to a nursing home, does her home need to be sold?”

 

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys