Need Help Planning For A Family Member With Special Needs? Qualified Advisors Are Rare

Emily Carmichael — April 27, 2023

Carolyn Sydlansky is 42 years old, three years younger than her brother, Paul. She’s funny and likes going to the movies and out to eat. Five days a week, she works with a performing arts group that puts on plays and musicals. Though Carolyn has never received a precise diagnosis, she has special needs and lives in a group home on Long Island, where she’s resided since her mid-twenties.

The home, her brother said, has been pivotal in giving Carolyn an independent, fulfilled adult life. A potential gift from her father threatened to take it away. 

Throughout the US, families with members who have special needs struggle to navigate a labyrinth of Federal and State regulations governing eligibility for disability benefits.  

Carolyn affords her group home through Medicaid and Supplemental Security Income, both of which are means-tested. In order to qualify, Carolyn cannot have more than $2,000 associated with her social security number. However, when the Sydlansky siblings’ father recently fell gravely ill, his estate plan left money to Carolyn — too much money.

“If my sister received an inheritance, her life would be turned upside down,” Paul said. That money would boost Carolyn’s net worth over $2,000, causing her to lose her health insurance and other benefits, including payments for the group home that is the center of her life. 

Paul, a financial advisor himself, was able to change his father’s estate before he passed away and keep one terrible situation from turning into two.

According to the Centers for Disease Control, 26 percent of the adult population in the United States has some kind of disability. The Social Security Administration reports 9.2 million receive disability benefits. The financial planning market for those with special needs and disabilities is huge yet largely unserviced. Many families end up navigating this fraught financial landscape on their own. 

When Michael C. Walther II founded Oak Wealth Advisors 15 years ago to assist families with special needs financial planning, there was no accreditation and very little support for planners interested in the area. 

“That became the biggest challenge,” Walther II said. “Finding information and then absorbing it all and building it into a practice.” 

Walther II reached out to the Academy of Special Needs Financial Planners, which consisted entirely of lawyers at that time, and advocated for them to open up their ranks to financial planners. Today, the organization includes numerous planners who attend conferences, host webinars, and support each other through a listserv. Oak Wealth Advisors is now a special needs financial planning leader, practicing nationwide and on five continents.  

Walther II, who has an autistic brother, described special needs financial planning as very similar to other financial planning. The process begins with the same questions: What does the client need to be safe, happy, and contribute to society? How are these endeavors best funded?

After that, however, special needs financial planning becomes idiosyncratic and nuanced. The families of people with special needs often must work with teams of people, including financial planners, lawyers, and health professionals, to navigate a suite of government programs that are far from straightforward and find ways to supplement those benefits without losing them. 

Navigating Government Benefits

Regardless of diagnosis, there’s no way to know how much money a person with special needs will require throughout their life, but government subsidies are more predictable. Like Carolyn, many with special needs receive Medicaid and SSI, a monthly income stipend of up to $914. Those with parents who have reached full retirement age and have received Medicare for two years can get Medicare and Social Security Disability Income, as well. The Supplemental Nutrition Assistance Program, SNAP for short, which provides a monthly payment of $200 for groceries, is also commonly used.

“The income amount the government will give your child is going to be north a million dollars from the time they’re 18,” Walther II said. “So, if you incorporate those things into the plan, it’s not quite as terrifying.”

Getting those benefits, which vary by state, can be tricky. Walther II said two-thirds of first-time Medicaid and SSI applicants are denied, and only 40 to 50 percent of those who reapply are awarded benefits. Unwitting applicants frequently make non-obvious errors that disqualify them. For example, a young person living at home may say their household is three people: themself and their parents. “You just got denied benefits because [the parents] have sufficient income,” Walther II said. Instead, the applicant should say their household is one, just themselves.  

The application process is riddled with hidden pitfalls like this. A significant part of Oak Wealth Advisors’ work is helping clients sidestep mistakes on forms to maximize their chances of approval.

Special Needs Trusts and ABLE Accounts

Once attained, government benefits present two significant challenges, both of which the Sydlanskys are intimately familiar with. First is keeping the benefits, which requires intentionally deflating one’s accounts to less than $2,000 monthly. Second is finding ways to supplement them, as subsistence on benefits alone may not be enough for a comfortable lifestyle. 

“My mom gets paranoid and crazy because [Carolyn] could lose her housing,” Paul said of trying to keep Carolyn’s account balances under the $2,000 limit. “There’s only so much you can spend on somebody who has limited capacity. There’s only so many times you can get them new sheets.”

Special needs trusts and ABLE accounts can help address both challenges. Walther II described them as “absolute cornerstones of financial planning.” 

Funds kept in special needs trusts, also known as supplemental needs trusts, do not count toward the $2,000 benefit eligibility limit. Money can be deposited into them freely but only withdrawn for expenditures that, as the name implies, supplement government benefits, like recreation and clothing. If the trust is used to purchase food, housing, or other items the government subsidizes, it might impact benefits.  

ABLE accounts are newer, created as part of the 2014 Achieving a Better Life Experience Act, and have been available since 2016. The balances of these tax-free savings accounts also do not impact benefits eligibility, but unlike special needs trusts, they can be used for “qualified disability expenses” like food, medical expenses, housing, etc. Depending on the state, they can absorb up to $30,000 in contributions annually and have a balance of $500,000 or more. 

Forty-six states have some kind of ABLE account program, many allowing people from other states to open an account. Passed in January, the ABLE Age Adjustment Act will loosen the age restrictions on ABLE accounts, opening the program to millions more users. Currently, people must be disabled before the age of 26 to qualify for an ABLE account. In 2026, that age will rise to 46.  

“We still don’t see it being utilized at the level we would anticipate,” Walther II said. “We think an ABLE account is like a Swiss army knife.”

Utilizing Estate Planning and Letters of Intent

Inheritances can be distributed into special needs trusts and ABLE accounts. For example, if a parent is worried they will use up all of their savings during their own retirement, they can purchase a life insurance account to be paid into a special needs trust for their child. In such cases, Walther II cautions that parents must understand the nature of the policy they purchase. Some policies may have more attractive, cheaper premiums, but they might be term-limited, meaning they only pay out if the policyholder dies before they reach retirement age. If they die after, the beneficiaries get nothing.  

“They could be paying into it for years not knowing that’s not going to do anything to help with their actual needs, but help the insurance agent, who wanted to sell a policy, to line his own pocket,” Walther II said.  

Permanent policies, on the other hand, might have a higher premium but are guaranteed to pay out no matter the age the parent dies. 

Beyond fiduciary care is the actual act of caregiving, the ins and outs and exceedingly unique facets of helping another person thrive in their daily lives. Paul Sydlansky and Walther II emphatically recommended that families draft a Letter of Intent called a Care Guide. These non-legal documents have nothing to do with how a trust is overseen, taxes, or how estates are to be divided. Walther II noted they explicitly lay out specifics like “how many calories a person should have. These are foods to avoid. These are doctors that are really helpful.” No detail is too small.  

“[Parents] have to basically face their own mortality, an idea that at some point, they might not be here to be the primary care provider, and someone else may have to step into their shoes,” he continued.  

Getting the Information Out

Walther II views a large part of his work as acquiring and supporting clients and increasing literacy of special needs financial planning among planners and families. With such a large market, he’s not worried about losing business to emerging competition. He frequently speaks to the media, publishes in-house educational content, and gives special needs financial planning presentations. 

Ultimately, Paul Sydlansky concluded that establishing a special needs trust or ABLE account for Carolyn before their father died was unnecessary due to family finances. He does find his personal experience to be an invaluable asset that makes him better informed to advise clients facing similar challenges. “I think [the ABLE account] is a tremendous tool for families.”