California parents of children with special needs often have challenging, lifetime planning options to consider. Lifetime care, including support for housing, caregivers and other professional support, can have costs that run well into seven figures.
There are various saving strategies and tools that can support savings for future care while allowing children to maintain access to special needs government programs. These programs include Supplemental Security Income (SSI), Medicaid and related disability benefits.
One savings option available for those looking at estate planning solutions include a special needs trust. This fund can provide income throughout a child’s life via a savings account called an ABLE account. A special needs trust can be funded with savings and life insurance proceeds for the parents.
In order to obtain SSI and Medicaid benefits, an individual must qualify according to strict means testing. A person with a disability receiving these benefits cannot have more than $2,000 in assets or $735 in monthly income. However, a special needs trust is governed by a third party and funded by assets that do not belong to the person with a disability. This could include life insurance benefits or other family property. Since the assets do not belong to the beneficiary, they do not count against the mandatory limits.
ABLE accounts, on the other hand, help families to save while deferring taxes. Distributions from the accounts are tax-free so long as they are used for qualified expenses related to a disability. These accounts can be used to save up to $14,000 annually; the total amount of the account cannot exceed $100,000.
Parents who need help planning for children with special needs may want to discuss options with a lawyer. An attorney can advise and guide in the drafting of a special needs trust.