Roberto Corral is a proud father to his son Julian, a young man with autism and he is also an associate member of the Special Needs Planning Institute, Inc., a non-profit organization whose focus is serving the special needs community. In 2003, Roberto was diagnosed with cardiomyopathy which resulted in him having a heart transplant during June, 2013 and changed his life path. He moved away from his occupation in the field of mortgage loans to completing the Special Education Advocacy Training program and is now the executive director of Corral Financial Strategies, a firm where he provides special needs planning, public benefits consulting, and related financial services. Last Saturday, I attended an informational seminar hosted by the Down Syndrome group of the San Gabriel Valley where Roberto gave a talk on special needs trusts and other services available to families with special needs children. Here is a summary of what he talked about:
The first and most important topic Roberto addressed is legal planning. In this section of the talk, he addressed the pros and cons of setting up a will, conservatorship, first party special needs trusts and third party irrevocable living special needs trusts.
1. Conservatorships:
Once a child turns 18, a parent can still make legal decisions for their child. Roberto shared a story where a child bought a $2K TV for his girlfriend at BestBuy. When the parent found out, she was able to cancel the transaction. Conservatorship can also be important for reproductive rights, I sort of tuned out on this topic as Luki is only 7 years old and I still have time. That's about what I retained about this topic. I was more interested in learning about government benefits and special needs trust which will cover the remainder of this blog post.
2. Wills:
Wills need to go through the courts and a 10-20% fee is added on. This is also made public records. If money is left to a special needs child via a will, they won't qualify for SSI benefits because this would make their assets too high for eligibility. SSI payments can be made after 18 years of age at a maximum of about $951.72 per month if one qualifies for low income which is capped at $2000 per year. With money in the bank through inheritance from a will, the adult child would no longer be able to get the monthly SSI payments. Some exceptions to this rule is having a house and life insurance payments which are not included as assets and income when calculating SSI eligibility. Roberto gave an example of another negative of establishing a direct will with the example as follows:
If $500,000 is bequeathed to a sibling with the understanding that half that amount will be used to care for the special needs sibling, there is no guarantee that the money will be safe for such a purpose. What if the sibling gets divorced? Half that money can go to a spouse. Or, what if the sibling starts a business and then goes bankrupt?
3. First Party Special Needs Trust:
John shared the story of a child who won millions of dollars through a lawsuit related to the cause of his disability. The money was put into a first party special needs trust since the money was made out to his name. In a first party special needs trust, the money is set aside for the child but in the event that the disabled child passes away, Medi-Cal will garner the remaining money in the trust somewhat as a payback for the services rendered through Medi-Cal during his lifetime. If a lot of money still remains in the trust, then there is much to be lost back to the government. A clause cannot be placed in this type of trust stipulating that Medi-Cal can't take the money.
4: Third Party Irrevocable Living Special Needs Trust:
In a third party special needs trust, anybody but the disabled child can put money into the trust. It cannot be changed except to change the trustee(parent) or beneficiary(child). If the child passes away, a sibling can get the money. In other words, the money will stay within the family, the government can't touch it, there are no taxes and the child can still qualify for SSI benefits.
5: SSI and SSDI:
SSI eligibility is based on income. One has to make less than $2000 per year to qualify for a maximum of $931.72 per month. This is the bare minimum calculated to cover the cost of food and lodging for a month.
SSDI is social security money based on work history of 10 years. One pays for this during their working years and gets it back when they retire.
6: :PASS program
I didn't really pay much attention to this topic as it applies mostly to adults 18-22 year of age. However, click on the hyperlink and you can read more about it via the social security office. As I understood it from Roberto, it allows 10-22 year olds to earn some money ( $7500/yr on top of the $2000 SSI cap) while going to college (at least 8 units per semester) and still qualify for the maximum SSI payment of $931.72 per month.
6: Private Insurance:
While dependent children can no longer be under their parent's health insurance after the age of 26; there is no such limit on children with disabilities and they can stay on their parents plans as long as the parents have health insurance through employment or have purchased health insurance on their own. The premium, however, may be a bit more.
7: Other Financial Plans:
Roberto informed us about a few other savings plans offered through various organizations and banks but these have fees associated with them. It seemed unnecessary for us to have because they don't accrue much interest and with inflation, the savings will not have the same purchasing power decades down the line as it would today.
One such program is the CalAble program click CalAble. It is a federal program which allows SSI kids to get $15,000 per year with a $100,000 cap without affecting their eligibility for MediCal or SSI. The Able account is based on the 529 plans which is to say it is run like a mutual fund or a savings account or 50:50 of each. Two financial institutions TIA and Merrill Lynch manage these plans for a fee but they also give free financial consultations.
So, if we want to hypothetically have a young adult use all the above resources, then he/she could earn $2000 (to qualify for SSI), $7500 through PASS program, $12,140 from family (there is no limit on how much they can get through a third party special needs trust) , $15,000 from the CalAble program and still qulaify for MediCal and SSI.
If none of the above plans are in place, the child will go into foster care.
After the seminar, the one take home message I had was that I need to get life insurance. We are not rich by any means and a life insurance policy would be the biggest fund for the third party special needs trust, I never liked to think about these things but I think it is time to get cracking.
Anybody have recommendations for a good life insurance policy?
I can't seem to get onto Roberto's website for some reason but here is a company that does Special Needs planning throughout the country. Silver Tree Special Needs Planning
