Financial advisor Brenton Harrison and attorney Jill Zacks join Mom Autism Money to decode a particularly complicated topic: Special Needs Trusts. In this episode, we’ll talk about first-party, third-party and pooled special needs trusts, Medicaid clawback provisions, the importance of life insurance for parents of disabled children, and how you might want to plan your retirement savings differently after listening to this episode.
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Joyce: Welcome to Mom Autism Money. Today we’re going to discuss special needs trust funds.
Brynne: Yes. Yes. If you guys listen to this episode really closely, you will actually hear Joyce and I, our brains exploding. We learned so much in this episode today. And I want to just let you guys know that if you’re stressed out about this, or if this is overly complex, you’re not alone.
One of the things that I do in my work is I’ll write about personal finance news. And one big story that’s been happening over the course of the past several years is actually Aretha Franklin. When she passed away, there were questions about if she even left a legal willl.
Brynne: And what ended up happening was Aretha Franklin needed a special needs trust.
She has a child, an adult child with disabilities, and as she tried to sort out her money, there were a lot of complications. She didn’t know how to leave that money to her child appropriately to protect it. She wasn’t sure who to assign as the trustee. And so there were actually several versions of her will that were left behind and none of them were quite official enough.
And so that’s been a massive court battle that’s been going on now for several years, just trying to figure out who’s in charge of the money she left behind, which child is supposed to be the trustee. And if that money was even left in a special needs trust. So even somebody like Aretha Franklin, she’s struggled with this.
And when she passed away, it was still a huge issue. So if you are feeling confused and overwhelmed, you are not alone. That said today, what we’re going to do is we’re going to try to break down some of the basics of special needs trusts. And I think Joyce after today, we kind of decided that this is something we’re going to explore a little bit more in the future.
Just kind of like that retirement planning aspect. And estate planning.
Joyce: Absolutely. Yes, this was such a good episode. It was such a good one. So I will suggest you stay tuned and listen. And because I will tell you that it will change your views on how to grow wealth and leave money to your children. So I suggest this is one of my favorites. It’s such a good informative podcast today. So please, please, please make sure that you listen and take action.
Brynne: For sure. And to discuss all of this, we sat down with two financial professionals, actually. We sat down with Brenton Harrison, who is a financial advisor and also Jillian Zacks, who is an attorney who specializes in this stuff.
Joyce: Brenton Harrison is a financial advisor who spent over a decade, empowering people to take control of their money.
He teaches strategies for overcoming the burden debt, juggling family and money and establishing a financial foothold for those who were never taught that principles of financial literacy, his work has been featured in publications, such as Business Insider, USA today, CNBC and Forbes. Brenton and his family reside in Nashville, Tennessee.
Brynne: We also talked to Jillian Zacks and she is an attorney with the law firm of McAndrews Mahalick Conley Pulse and Ryan PC in Pittsburgh, PA. She is active in the community providing educational seminars to families, professionals, and fellow attorneys on topics such as estate planning, special needs trusts, transition to adulthood and ABLE accounts.
She has served on the boards of various nonprofits and has won awards for her work in this space. On top of all that Jillian is also the mother of two neurodiverse children herself.
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Brynne: All right. Hi, everyone. Welcome to Mom Autism Money. We are here today with Brenton Harrison and Jill Zacks and we are going to be talking about special needs trusts. And the first question that I want to ask you guys is just… Jill, you and I were talking a little bit about the importance of special needs trusst and kind of the purpose that they serve and why you might want one.
And I’m wondering if you guys might be able to tell us a little bit more about that.
Jill: Often times an individual with a disability is receiving means tested benefits. So that could be supplemental security income. It could be medical assistance, it could be snap benefits. It could be any of a variety of benefits that are resource-based meaning you can’t have over a certain amount of money to continue to qualify for those benefits.
And in particular, the two benefits that we see in our planning, our SSI SSDI and in particular medical assistance. Because medical assistance, which is a health benefit, opens the door to what we call waiver funding, which allows individuals to live and thrive in the community with supports. And so all of those are resource-based meaning you can’t typically have more than $2,000 to continue to access these benefits.
So most of our planning is around how do we get the best of both worlds? How do we provide for our loved ones, our family members, our children, and still have them access, oftentimes medical benefits that are only available through these systems. So it’s trying to figure out how to balance those two.
Brenton: For me, I am actually kind of many times the conduit between the client and the attorney.
We see people who come to us really one of two ways. You have families who might have a concern for their child, but those concerns have not yet manifested themselves to the point where it’s like a daily part of their existence. So when we’re meeting with them about their finances, it may be that we have to ask some more probing questions so that they understand that a trust might be needed or that we might need to bring in an outside professional to help talk through some of those concerns.
So for those people, it’s really on us to, throughout the course of that meeting, ask those questions, look at how they have their beneficiaries set up and talk through some of those things they may not know are concern. That’s the first group. And then the second group are those that come to us after they’ve met with the attorney, and they’ve already set up these items and now they’re in management mode.
How do we make sure that the items that we put into these trusts are appropriately managed and cared for? So it’s really just a matter of what is the parent or the family experiencing at that point in the time with their child.
Jill: And I think both of us as professionals, a lot of what we do is education.
So much of when a client comes through the door is putting together the pieces of what people understand and what knowledge still needs to be acquired. It is a really complex field. There are so many moving parts and things change. The social security rules are constantly changing. So we are, as professionals, are trying to keep up on this so that we can be the best resource for our clients as this landscape changes quite frequent.
Brynne: Absolutely. I think a lot of parents are in our audience know about special needs trusts just generally. But I think a lot of people are intimidated by just starting that process. So one of the big questions that we get is do I even have enough money to make this worth it? Do I even have enough money saved up to make this financial expense of setting up a trust reasonable, or just make sense in the math column?
So I’m wondering kind of how much money do you guys recommend that your clients have saved up before they established this trust? And then how much does it cost? How much does that experience of just setting up the trust itself? How much is that? Like how much should parents save up for that outside of their own savings that they want to keep within the trust?
Brenton: You know, I can, I would let Jill I’ll defer to her in terms of the cost of setting it up from what we’ve seen with clients, you have clients who are setting it up as a standalone trust. You have clients who are setting it up as a part of a will, so they can really, really vary. So I’ll defer to her on that. In terms of the amount of money where we might recommend it, that actually, and you hate to say it takes a back seat, especially because the family saying like, no, the, the amount of money is very much relevant to me. In terms of planning, it takes a back seat in my mind, because there are questions that I want to know first.
How many people are going to be contributing to this trust? Are they, are they contributing while they’re alive? Versus is this something that they’re trying to leave to your child upon their death? Those questions are really important because if these are just things where, Hey, I want this to be created upon my death, funded upon my death, my spouse and I, my partner and I, or I am the only one that’s contributing to it, it might be something that you can do as a part of a will. Whereas when we have people who have multiple family members who are contributing funds and they might be planning to leave it directly to that child, then we would be saying, Hey, I understand that it’s an expense let’s partner with you to see where we can find the most cost effective resource.
But this is something that needs to be done now.
Jill: And I think that’s important and thinking about why you’re creating this trust. So back to the fact that your child or loved one may be receiving those means tested benefits. You have to remember that if they ever receive more than $2,000, they’re going to be disqualified from receiving those means tested benefits.
So it’s a question of. Not should I create a trust, but when, and what other mechanisms do I have to make sure that we’re preserving that benefit and providing for the future? So just as Brenton said, it’s looking at all these factors, how many people are going to be contributing? What are you contributing?
But the fact that you may need a trust is a necessity. Because there are things that you may have, you may be working and have a life insurance policy at work that may be more than $2,000. It could be, you know, your, your salary. So it could be $40k, $50k, $60k, even more, you know, depending on your salary, one time salary, two times salary, if that goes to default and you haven’t made a provision to leave it for a trust for your child, it could potentially be a disqualifying asset upon passing. IRAs, 401ks, anything that has a beneficiary designation.
We work with individuals like Brenton to make sure we’re coordinating so that these trusts are created for the right reasons to make sure that you’re protecting that benefit. So when it comes to whether I should create a trust, definitely something that that should be part of that planning process. I know, you know, we’re also going to be talking about ABLE accounts and different types of special needs trust, but depending on the type of trust, but you want, if it’s money, that’s never been in the name of the individual with the disability, you want to be proactive and create what we call a third party funded, special needs trust so that you, your, your loved one can receive those means tested benefits like SSI and Medicaid, but also have those assets in the trust.
Now, when you think about a trust, you want it, well, what is it? It’s a, it’s a word, but really a trust is just a box. It’s, you’re creating it in a document and you’re filling it with, with those assets that when you’re working with your financial professional, they’re going to direct into it. So you know, that life insurance that may come through that IRA, you know, that investment account you may have, that’s gonna fill the box.
And that is then distributed when your child needs it. So just as Brenton said, it, it could be created upon your passing. Or you could create it during life. You could make what we call an inter vivos or a living trust. That’s ready and waiting. I often do those and they’re dry. They’re not funded until passing, but that way it allows other family members to name that trust.
You can have just one. And it can be named for everyone to point their assets to fund that trust for the life of the individual with a disability. Now, the cost of creating the trust varies from state to state. I know our firm, we have a base fee of $950 to create the trust, you know, coming in the door that that’s what you would spend on the trust. I being a single mom with two kids on the spectrum really don’t like anyone to be turned away. If there is a way you can talk with your attorney about setting up a paymentt plan, to talk about some sort of a discount, do it. But I’d say across the country and Brenton, you may know differently, but it ranges anywhere from that cost all the way up to $2,500, maybe a little more if you’re in New York or California, but that’s just for that particular document the attorney then may charge more for the will. You can also put the trust inside the will, meaning it doesn’t get activated till the will goes through the probate process. Usually my preference is to create it already and have it standing alone and ready and waiting so that you can point all those designations in the right direction.
But that’s pretty much the cost of creating it. And I do caution clients to make sure that they are working with a professional that understands these trusts because they have to be crafted properly to be able to preserve that benefit. We’ll talk, I guess, in a few minutes about the different types of trusts, but the one that we were talking about, the two with Brenton and I is that third party funded, funded with money that’s never been in the name of the individual with a disability. that allows them to access that money throughout their life, through the trust, through a trustees. So there are a lot of moving parts in a trust. And if you’d like, I can go into that in more detail.
Brenton: If I could add something, she said, something that I think is really crucial.
She talked about referring her clients to a professional who understands how the trusts work and, you know, unfortunately not everyone will be in a position where they can work with an attorney, a financial advisor, all those professionals. So. One of the crucial things, because this is a really daunting process to many people.
You know, they don’t understand the terminology they’re dealing with their child, so it’s something that’s of crucial importance to them. So you would hope that they’re dealing with an attorney if that’s the only professional with which they’re dealing that can tell them, Hey, if you are going to go from here and try to manage these things yourselves, you need to make sure your beneficiaries are titled like this.
You know, give me a list of all the accounts that you currently have and let’s see how their titled and then any future accounts they need to be titled like this. So that if the person isn’t working with a financial professional, they know, Hey, I opened up this account after. You know, I completed that process, but I remember that they told me for any future accounts, I needed to title them this way.
And that is a part I can’t tell you how many times we meet with people who have actually gone through the process of creating these documents, but they don’t remember to tell us about it. When we set up a new life insurance policy or a new retirement account, and then the beneficiaries are just completely counter to what, the way their attorney wanted them drawn up.
So you have to know that second part of it that says, if I have a professional, I need to let them know that this is what my attorney told me to do. And if I don’t, then I really need to make sure I remember what they told me in terms of how to title those assets when they pass.
Brynne: I have a quick question about that.
If you’re a parent who’s just shopping around, I mean, special needs trusts in and of themselves. Like you said, the vocabulary, everything about them is super complicated, but also shopping around for an attorney or for a financial advisor can feel like a daunting task to most everyday people. So how do you even go about vetting your financial advisor or your lawyer to make sure that they do have the experience with the special needs trusts with these complex financial needs?
Because I know not everybody does.
Brenton: Yeah. I think for the financial professional, I want somebody to work with someone they trust and someone who is willing to say what they know and don’t know. There’s going to be things that I wouldn’t know where I would still prefer a client to work with me because they’re going to trust that I’m going to bring in outside professionals.
So to me, if you find a person who knows what they’re talking about in terms of the special needs trust, but they make you feel horrible throughout the process, you know, it might be a better fit to find somebody who empathizes with you and has enough humility to say, I’m going to work as hard as I can to bring in professional help so that I’m, I’m not causing damage to this situation.
So if you can find that perfect blend, someone who has the experience and makes you feel like you’re a part of the process, that’s the ideal, but I don’t want to discount the importance of just being in a room with someone who you feel, you know, if not understands where you’re coming from at least is, is arm-in-arm with you.
Jill: Totally agree. Um, that comfort level of the client professional relationship is really important. And oftentimes, you know, I have, we’ll have clients that are working with another professional that they’re comfortable with, and that person brings me in just for this aspect. So totally on point to what Brenton said, that this does happen oftentimes where you’ll reach out to that person that has a focus in the field.
And when you’re looking for an attorney, you want to ask them some questions, you know, do you typically do special needs, trusts? Um, how often do you do them? Do you do them as part of the will and say, you know, my child gets these types of benefits. How do you protect them with the trust? Are there other avenues that I can use besides the trust?
So those are all good questions to ask, and you can usually find out a lot of information from the firm’s websites. So like for example, I joined my firm about three years ago because this is their focus. And when you look at their website, you see they’ve been doing special needs trusts, and special education for over 35 years.
And you’ll find that information on the internet. And a lot of times people find me and probably Brenton and they find you through word of mouth. Listen to your other parents, who do they go to? Who have they trusted? Who do they feel comfortable with? That’s important as well to have that, that comfort base.
Brynne: For sure.
Do we want to jump into some of that vocabulary and kind of teach parents a little bit about what kind of terminology they’re going to run across and what it all means for them?
Jill: Yes, definitely. So let’s jump back to trusts. There’s three types of special needs trusts. And really the big question when you’re talking about special needs trusts are whose money is it?
So is it the money that was in the name of the individual with a disability? Is it parents or grandparents or aunts and uncles money? That determines the type of trust because there’s a lot of rules surrounding these types of trusts. So we first talked about what we call third party funded or supplemental needs trusts.
Those are the trusts that are funded with money that’s never been in the name of the individual with the disability. So for example, I have a life insurance policy I’ve named the trust for my children. That is my money. I’m giving it to them. That is a third party trust. Grandpa John wants to give X amount of money.
That is not the money that’s the individual with a disability, that goes into a third-party trust. This is typically the proactive planning trust, the type of trust you’re naming in your documents, your naming as your beneficiary designation, you create it. It’s there. It’s waiting to be funded. It can be funded during life.
It gets a little more complicated with, with tax rules, but it can be funded as you go along. But typically these types of trusts, my clients are waiting and funding upon their passing, knowing that they’ll provide as much as they can for their loved one during their life. And then when they pass them, the assets they’ve designated will go into this trust.
The second type of trust is a what we call a self-funded or first-party special needs trust, meaning that’s money that’s in the name of the individual with a disability. So you’ll see this happen in cases where there’s a personal injury claim, medical malpractice case. Oftentimes I see it where a child is applying for SSI and a grandparent had an unknown uniform trust for minor’s account.
And it’s got $30,000 in there, and that disqualifies them from getting supplemental security income. So we’ll have to do something with that, that money. It can also be just as Brenton said, client comes in the door and they forgot to change the beneficiary designation on someone they pass away. And now that money is going directly to the individual.
So what do you do? You don’t want to lose these important benefits waiver funds that allow you to receive housing and supports in the community. SSI and medical assistance are all jeopardized if you go over this $2,000 limit, at least in Pennsylvania, that’s where we are limit for resources. So you can create one of these self-funded special needs trusts.
And again, it’s just the same thing. It’s a trust document. It’s like a box filling it with that asset, but the difference is unlike the third party funded trust, this trust has to first pay back the department of human services in any state where the individual is receiving medical assistance for those services provided.
So what happens is when this trust terminates or, or the beneficiary passes away, it’s like Medicaid’s been keeping a lien, a tab, like say on all those medical services you’ve been using and that needs to be paid back. That’s why they’re often called payback trusts upon the passing of the individuals.
So for example, you’ve got a million dollars in a trust, big personal injury case. The individual, you know, uses that throughout their lifetime, they have the trust and they also are receiving medical assistance. There is then a statement they pass away and there is then a statement of claim that’s provided by the department, whatever state, the individuals receiving those services.
And that needs to be satisfied first before the money can go to who’s designated as a remainder beneficiary in the trust. So that brings up another term. What is a remainder beneficiary? Well, the assets in the trust are used for supplementing the life of an individual with a disability throughout their life.
Upon their passing, if there’s money left over in that trust, when you created the trust, you get to decide where it goes. Those are the remainder beneficiaries, the individuals that charitable organizations or whatever you choose, wherever that money you decide goes. In my case, since I have two children on the spectrum, it just goes to the next child’s trust.
If that child is living. You know, you get to decide that what you have to remember is if it’s a payback trust, Before that can happen. The lien, the claim that is made is satisfied and then the money goes. So in that example, I was giving million dollars. The claim is 500, then the 500 that’s left after all the trust expenses and administration, and accountings then can distribute to those remainder beneficiaries.
So those are two types of trusts. So the first is money. That’s never been in the name of the individual with a disability. That’s the third party funded trust. They use it to supplement lifestyle, and then it goes to the remainder beneficiaries, the people, you, or organizations, or charitable organizations, you’ve decided that it goes to when that trust ends.
Brynne: Gotcha. I want to, I want to take one second here just because Medicaid clawbacks are something that our audience freaks out about. Justly so. It does not seem like it’s a very fair way to treat disabled individuals in this country. And hopefully things will change around those regulations in the future. But just let me kind of reframe what you said, just to make sure I’m understanding completely.
So with the third party trusts and that’s Mom, I’m putting money into this trust for my kid. Maybe grandma leaves some money in the special needs trust for the kid. That money has never been in my child’s name. So we don’t have to worry about Medicaid clawbacks in that situation. Now, if you have a first party trust, let’s say grandma passed away and she didn’t know anything about special needs trusts, right?
And she left the money to your child without that protection. That’s when you’re going to have a first party special needs trust. And that’s the scenario where you would be way more worried about those Medicaid clawback provisions. Is that, is that correct? Am I understanding all of that?
Jill: That is completely correct.
And oftentimes when grandma leaves that money, we look at different options. So, and I know we’re going to talk about a future, but you always have the option to put $15,000 in an able account. You also have another option, which is a pooled trust.
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Jill: So when we talk about the types of options that you have, another option, third type of special needs trust is a pooled trust. And that is a trust where the trustee and we haven’t talked about that term yet, but it’s a really important player in all of this picture. The trustee is a nonprofit organization that handles these trusts for individuals with disabilities. So, you know, pool trust. So if grandma, you know, left that money and you didn’t want to go to the expense of creating a self-funded special needs trust, you could immediately access a pool trust with a nonprofit organization and put that money into the pooled trust.
Now, the difference is there is no payback on these pooled trusts, but it doesn’t go to your remainder beneficiaries. It goes back to help other individuals in the community with disabilities. So for example, in here in the Pittsburgh area where I am, one of the large non-profit trustees is Achieva family trust.
So they have grants that you can apply to from these funds. So clients that need, you know, have their own house because you’re allowed to own a house and still receive SSI, can, you know, access those funds if they need a new roof or, you know, I had a family that needed a new iPad. For their child, you know, you can apply for all different things through these funds.
When it’s say it goes back to the community, it goes back in those ways. So that’s another type of trust that can be accessed in that situation, where money comes into the name of the individual and you don’t want to lose those means tested benefits.
Brenton: Can I ask a question this, you know, this is you come across things, like you said, you’re not going to know all the answers.
And we will actually come across a client where they’re wondering if, if it’s too late to kind of, unscramble the egg where, you know, Hey, this money was left to my child, but it was nine months ago, you know, is there a deadline in terms of how quickly you need to establish the first party trust in order to not jeopardize those benefits?
Or what is the process to make sure that you’re adhering to all the regulations?
Jill: So each state is different. Typically you’re given like a 30 day window to spend down the assets and then it can start to affect your means tested benefits. But you can, you can work with the department of human services –that’s here in Pennsylvania — to fund that trust because they’re going to approve that trust. They’re going to approve that transfer. That’s part of that first party trust is that approval process. So there may be some sort of loss of a benefit in that period, but once you get that resource properly allocated to where it needs to go, you should should be okay.
It just really depends on working with the right state agencies and maybe on the federal level, the SS — social security administration. And that’s another good part, you know, of working with an attorney that’s well versed in this area because they’ll have those, those key players that they need to contact to work through some of those issues.
Brynne: What is the trustee and all the different considerations people should be thinking about with that?
Jill: So a trustee is sort of, when you talk about that trust box, they’re the person that’s investing the assets and making that box grow, they’re also the person putting their hand in that box and saying, okay, this is an allowable distribution from the trust.
This is what we can expend money on for the individual who’s receiving those means tested benefits that disabled beneficiary that’s the term used under law, disabled beneficiary. That’s what we can spend the money on. So they have a huge role. So not only are they charged with protecting those assets and protecting the beneficiary and having a duty to them.
But they also have to do other things, like make sure that if the individual needs to go on a vacation that that’s covered, if they need a new iPad that they’re able to do that, they’re also, it doesn’t have to be an individual. It can be a company just like we talked about that nonprofit or corporate entities.
So, so you think about a trustee in several ways, you think about what are their duties? What do they have to do? What does the trust say they can do? What are the guidelines they must adhere to? Like, what can they give money for? What does SSI, you know, say they can’t the trust can’t pay for and then who, or what is the best person or entity when you consider trustees?
There’s a lot of different factors. Like who, who, or what, what entity or what person. So oftentimes, I will have family members pick a sibling or an aunt or an uncle or a grandparent, someone they trust in their family to be that trustee, but it’s a big job. So, you know, they have to understand how to invest the money.
They have to understand that taxes have to be filed. You know, a return has to be filed that, you know, income that distributes out to the beneficiary has to get on a special form and all those things have to be done and that, you know, they can’t give cash to the person or it might disqualify them from receiving benefits.
That’s like a lot that plays into who you’re picking as a trustee because they really have to be someone responsible and understanding. You also have to think about family relationships and, and I take a lot of time to talk to clients about, you know, do we want to put this responsibility on a sibling when really we want to develop that relationship?
And we also have to think about conflicts. Like a lot of times parents are like, okay, if something happens to this child, then the whatever’s left in the trust is going to go to all my other children. Well, inherently that might be a conflict. I have a case where I’ve, I’ve, I’ve seen it happen. Siblings know that that money is going to eventually come to them.
So they’re really not providing for the individual, with the disability. You don’t think it’s going to happen as a parent, but sometimes people marry other people or in long-term relationships with someone that may see that nest egg and that trust for them. So you want to think through all of these dynamics, that’s just one part of it.
It’s so important to really think about who is the right person. So if it’s not a person then who is it, it can be a company. So there’s private companies like corporations that are trustees, and then there’s nonprofits. Like we talked about the non-profits that have the pool trust. Well, they also do these first party and third party trusst.
And you know, they’re going to charge a fee, but they’re going to know they’re. Like, if you’re going to one that specifically understands special needs trusts, and that’s what that non-profits focus is, but it can be percentages of the actual principal or amount in the trust. So a nonprofit will be completely upfront with what those fees are, but they need to be able to run and they have a responsibility to pay their employees and do all of those things.
But you know that they’re in the business of managing these trusts. Now the other option is a corporate trustee. Someone who’s not a nonprofit they’re for making money and they charge a percentage of the principle of the trust. Now most of the corporate trustees have minimums. Like I haven’t seen any go below $250,000.
Oftentimes some of the banks in our area are one to 2 million for special needs trust. And you need to be careful because a lot of them don’t do special needs trusts, and they’re getting out of the business of doing special needs trusts. So you want to make sure that you vet them and ask them all those questions in advance.
Is this the type of trust that you do? Do you do a lot of this? Are you going to understand that if you know, this is what my child needs, that’s important. Another type of trustee, which is popular with a lot of my clients, because they have relationships with their financial professional is one that acts as like a third party administrator.
So you get to have your financial professional managing all that money after you pass. And then there’s someone that’s making those expenditures, paying the taxes, et cetera. Now, one of the options that is a sort of get the best of both worlds, if it’s possible is to name a family member and a corporate trustee as co-trustees. That way you have that check in a balance, you’ve got someone that understands the individual with a disability, understanding that, you know what, yes, they do break their iPad.
It’s their only means of communication. And they need one every four months, or yes, you’ve got to buy that really important insurance policy on the iPad to get it covered or glasses, you know, that you only get so many. My kids have Gateway. You only get so many glasses a year through Gateway. And you know, when my son was little, those glasses were quite often broken.
So, you know, those are the kinds of things that maybe that personal touch of the individual is important versus that just that corporate entity, that’s only meeting with your loved one, maybe twice a year. So all really important things to think about. And I saw Brenton, you wanted to add.
Brenton: Yeah. As an advisor, when you have those conversations, I talked about when you are prepping the family for things that might be an issue that they haven’t even thought about upon their death, each advisor’s going to have their preference.
My preference is actually if possible, co-trustee with either a non-profit or a corporate trust company, and the reason for it boils down in terms of my preference to respite care. If your community is not familiar with the concept of respite care, you’re definitely familiar with the idea of as much as you love a person, as much as you love your child, it can be tiring and you are uniquely aware of the challenges, but you’re also very protective of making sure that your child is not seen as a burden to someone else.
Right? You want your child in a position where the only concern is, can I make sure this child is taken care of? And am I well rested? And what I’ve seen in the past is someone says, oh, well, my sister will be able to take care of it. And that sister or that brother or that aunt or that uncle has no idea, the amount of work that can go into making sure that they’re not jeopardizing those benefits.
And you may not want your child in a position where somebody who doesn’t have that experience is doing it, or somebody is stressed out trying to gain that experience on the fly. So how that often translates in terms of how you might fund that trust is if I have a family who has these concerns in terms of, when we talk about the parents’ insurance needs, I’m going to go high and I’m going to try to find a way for them to afford as much as they possibly can in terms of what’s appropriate, because I want that life insurance benefit to help pay for the professionals that can help cover some of those items.
Right? If it was somebody who, when we did their analysis and they didn’t have those concerns, they might have needed a million dollars of insurance. I’m going to say. Can we find a way to afford 2 million? Because if we can, we want to provide as much resources as possible. So then it’s not a concern of, you know, this is the ideal scenario, but I just don’t know if the money is going to last. So I’m going to see if my brother can do it.
If you feel that family member has that capacity. That’s great. But I know even with families who don’t worry about this with their children, and they’re just trying to figure out who would watch my child, who would be the caretaker for my child. If I die, the person that is managing their finances may be completely different than the person you want watching your child.
So you want to consider that as well.
Brynne: I am going to go up my life insurance policy because that was actually another one of our questions is that particularly for mothers and particularly, I mean, of all disabilities, we see maternal income go down. Whenever they, whenever there is a disabled child in the home.
For autism, that gap almost doubles when your child is autistic. We don’t see the same pattern for, for paternal income, but again, a lot more mothers are raising their children on their own than fathers, generally speaking. So when we’re talking about the practicalities of that, you might not have a lot of cash to set…
You might be freaking out thinking, like, I don’t know how I’m going to save for my own retirement. How am I going to save for my child’s retirement as well? How am I going to save up for all of these incredibly expensive services? And it sounds like maybe getting a good life insurance policy might be a good solution.
I’m wondering if you have any other kind of words of encouragement or just other tricks that when you’re working on a limited income, how can you kind of bridge that gap and even begin to think about saving extra money in a trust.
Brenton: You know, I I’d be interested to hear Jill’s take on some metrics, to make sure that they adhere with what works for the attorney.
To me, life insurance is the first place to go because, you know, as long as the parent is in good health, you can get substantial coverage. If you’re talking about like term life insurance for far less than it costs to like save dollar for dollar, for those resources, it’s like, okay, I could, you know, my child might need a quarter of a million dollars worth of benefits over the course of their lifetime.
I can save $250,000 or I can go pay 20 bucks a month and get a $250,000 term insurance policy. So that at least when I die, those things are provided for. Especially when we have families who might have multiple children or we have a family who is not yet sure how much their child will need in terms of the resources are things like putting it in a 529.
You know, you talked about 529 able accounts. In some circumstances, they can be transferred at a regular traditional 529 can be transferred to a 529 able account and a traditional 529 does not have that clawback provision, like a 529 able account does. So you might have someone who’s like, I want to start saving now, however small that is, I’m not sure what my child will need.
We might say, Hey, before you go through the process of trying to get a 529 able account, let’s just start a 529 account. And, and if those needs change, we can go through the process of seeing if we can transfer it. You also have people in terms of, Hey, I’m trying to manage my own finances while also trying to make sure my child is provided for where we might encourage them.
As odd as it may sound, we’ll come across a family who is maxing out their retirement. You know, $20,000 a year into their retirement account or $10,000 a year, whatever they’re able to do. And we may say until these things are kind of fleshed out, you might want to max out what your employer will contribute on your behalf, and then put some of these funds in an account that’s not a retirement account that has more flexibility in terms of how you can access it so that if things change, we then have the ability to go to the attorney, to go to the trust company and say, here are the resources that we have do what you can with it. As opposed to saying, I actually have a significant amount of money, but it’s in this account that I can’t access till I’m 59 and a half.
And now I need it.
Jill: All really important. When you think about funding, the trust, especially you started with life insurance and I happen to completely agree with you. That life insurance is a great mechanism to fund a special needs trust. The type of insurance you want to look at, you know, term you get more bang for your buck, you know, you, you, but it’s like a mortgage, you know, if you’re paying each month and it ends at a certain point, permanent or whole life insurance is optimally the better, because it’s always going to be there no matter when you pass, but it’s so expensive.
So depending on your means, you’re going to work with something like Brenton. And he’s going to tell you, this is what I recommend, but life insurance I happen to completely agree is a really good way to fund a third party funded, special needs trust. Making sure you’ve got that right beneficiary designation.
The reason I like it, I use myself as an example. I look at it like I am going to need to be able to provide for myself and my kids throughout my life. So, you know, I’m going to put that money in the 401k and I’m going to save some money in IRA. But knowing that that life insurance is there, I can provide for myself and have some money for retirement and save.
But then that life insurance, if I have a permanent policy will be there when I pass so that I can provide for them now and I can provide for them after. So I look at it as like those two retirement kind of issues like mine, and then that of my children, which goes on after me. And you know, when you’re, when you’re trying to find the bucket to take this money from Brenton’s points are so well taken.
People always say to you, put it all in your 401k, all in your 401k. But his point that that may not be when you’re planning in this type of scenario may not be the best option. That’s why you need to look at all those buckets. As the attorney, we have even a higher level to look at because there’s all these issues with taxation of those qualified funds.
That means a fund that you deferred the tax on those IRAs 401ks at work, like there’s a bigger tax hit on the backend. And that may diminish what you wanted to put into that trust for your child, depending on the tax laws at the time. And they’re constantly changing. I can’t even tell you how many tax laws have changed in the years that I’ve been doing this.
So it’s constantly moving, but I can’t stress enough. How important what Brenton said is that there’s so many different buckets to use. Life insurance is a great avenue to use. There’s retirement funds, there’s cash, but that’s why working with a professional that understands these different needs is important.
Brynne: Absolutely. And I’m wondering if we can talk a little bit more about ABLE accounts. So I have a couple of questions on this end. So the first thing is special needs trusts used to be one of, if not, the only way to shelter your assets from these means based tests for like, for SSI, for Medicaid access for all of these different programs.
And then just in the past five or six years now, there’s this new product on the market called an able account and an ABLE account is not something it’s, it’s a 529. So it’s super easy to open very low barrier to entry. When we’re talking about your initial investment, you can contribute as much as you want.
And it also shelters up to a hundred thousand dollars from that SSI means based testing. So with this new product on the market, how does that affect people’s financial planning. A lot of our listeners have that question is I don’t know whether to open, an ABLE account or whether to open a special needs trust, and I’m feeling kind of paralyzed and just not making a decision because I don’t even know what considerations to take in.
Brenton: To me, the benefit to a financial plan of, of having access to a 529 able account is it’s another resource. It’s another tool in the toolkit toolbox. There is a concern of mine that says, if a person is opening a 529 able account that they might be skipping over what is still the necessary conversation of how will these things play out if I were to pass.
So I don’t think one should substitute for the other. I agree that it is far less financially to get one off the ground. It does need to be coupled with that conversation of okay. But if something happens to me, what happens to my child? So I would rather it be an addition rather than, you know, a replacement.
In terms of how you have that interchange or that interplay between a traditional 529 and a 529 able account that goes back to what I was saying at the beginning. Is the parent more aware of what the future might hold in terms of resources that child might need, or are they speculating? If the parent is speculating, you know, Hey, we’ve had to go have my child’s hearing assessed.
And then we had to go to a speech pathologist, but they said that they’re not going to test them for anything until they’re four years old. Okay. Well that sounds like we might just need to open a 529 account until we have some more clarity. And then if they’re referred, if there’s something that they’re formally diagnosed with, then we can start to have the conversation of, can we transfer this account?
Jill: I agree a 529 is, is one of the tools in the toolbox. You can put up to 15,000 a year, but it has a lot of other benefits. So I always suggest to clients, you know, open the able account, create a trust, have both accessible because the able account, you know, you can use that. It grows tax free. You know, unlike a trust it’s growing so there’s other benefits it’s growing tax free. If it’s for disability-related expenses, it just distributes tax-free to the individual.
So you’re not paying that income tax on it, as it’s, as it’s growing and in Pennsylvania, we’re lucky it doesn’t have a payback provision, but other states do so you really have to look at your state, but in Pennsylvania, we’re really lucky because there’s no payback provisions and it doesn’t pay Pennsylvania inheritance tax when it distributes out to family members.
So, but in other states, you do want to look at the fact that that may have that payback provision to the service department in that state that’s provided medical benefits to the individual. Um, but it has a lot of other perks to it. So it is a great thing have, but you’re not going to have that trustee that’s looking out for how those expenses are made.
So it is an account in the name of the individual, the guardian, if there’s a guardian, is the one that would be accessing that, that account or the individual themselves has opened the account. You also have to look at sometimes there’s fees. So my daughter has an ABLE account. When we apply for her SSI, we moved some of her assets into her ABLE, which you’re allowed to do to make sure you know, that everything was right in line with her resource limits.
Now there’s like, I always joke because that amount keeps going down. Cause there’s like a $5 fee every month. We don’t have that much in there. So you want to look at some of these other things like, depending on which parts of the able account you’re using as your investment angle. But I do like that, you know, if you’re unsure, you can always move 15,000 a year from a 529 regular college account into a 529A.
But also remember that the able accounts can also pay for college. So if you’re certain of a disability diagnosis under age 26, you can have both of those options to pay for college. But one of the other things about the able account that I do like and I often have clients have both the trust and an ABLE account is that he is allowed to make expenditures for housing within the 30 day period.
So if the rent comes due and you pay. And it comes out of the ABLE account. You’re allowed to make that within a 30 day period, versus if you were to make an expenditure for housing out of a trust, it’s considered in kind support maintenance, and it may deduct what the individual gets for their supplemental security income.
So there’s all these moving rules. So this able account is just another good thing to have for a lot of different reasons. But if you’re thinking that your child may need more than a hundred thousand, or you like that idea, that trustee and the terms of that trust as protecting the individual, then that’s definitely something you also want to look at
Brenton: That actually —
Everything you just said speaks to why I like the pairing that you mentioned. Because when I spoke, I said, you know, the 529 able account could have that clawback provision. I said, that did have a clawback provision. And you said actually in Pennsylvania, it doesn’t. So to me, that’s a perfect interplay that shows, Hey, I prefer people not just open ABLE account, unaware of all the details of it without saying, I also need to engage an attorney or a trust company, because even if you open that able account and came to me to manage the funds inside of it, I may not have the requisite experience to say, Hey, I’m in Nashville.
The client that I have in Pittsburgh has an able account that doesn’t work the same as another client in a different state. So I, you know, when she said, I prefer people to have both. I’m like a lot of the reason why I agree is because to have both, you have to have talked to a professional
Brynne: For sure, for sure. And for our listeners who maybe are living below the poverty line and are like, Hey, I can’t do that.
We’ve talked a lot about resources today. You can talk to anattorney, they’ll try to work with you a lot of times. You can talk to some of these nonprofit agencies. If you’re trying to protect your benefits and you feel like you can’t set up a special needs trust, don’t feel like, oh my gosh, I have to do everything all at once.
If you need to open an able account, and it’s literally the only thing that’s going to be protecting you, open the able account it’s fairly easy and simple to do on your own, but just like Brenton is saying, do not let that stop you from sitting down and having that important conversation about what happens after I’m gone because for not all of our kids, but for a lot of our kids, when we are gone, there’s significant planning that needs to happen in order to make sure that they’re taken care of.
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We do have a lot of listener questions. Like I said, everyone is super interested in special needs trusts. So I want to hit a couple of these. All right. So our first question is what is the best way to set up a special needs trust? If you have more than one family member leaving money to a disabled person, when they die.
Jill: So that’s that third party funded, special needs trust that we talked about and you would create it sort of standing alone, not as part of a will, because the will, if you create the trust under a will, it doesn’t get activated until that person passes away. So you don’t want to wait for that probate process.
So you would create a trust and then everyone, they would do a beneficiary designation or a designation under their will, whoever meaning this one trust all pointing towards that one, trustee would say to the trustee of the Jillian Zacks supplemental needs trust dated X, and everyone would just point their fingers to appoint their beneficiary designations towards that vehicle, that box and filling it with whatever they choose.
Brynne: And again, listeners, I’m just going to encourage you. We are talking in generalities today. So if you have any specific questions, make sure you go and sit down with your own lawyer, your own financial planner, because everyone’s finances are different. But this next question is, does the trust need to be set up separately from a will before any family member passes away?
Jill: So if the trust is set up under the will and then someone passes away, then the trust is created. And then once that trust is alive and moving, someone else could name that trust. But you run into an issue. If, if someone names the trust under the will and it hasn’t been created yet, that that would be the issue.
Brynne: So Brenton, this might, this might be a great one for you.
Cause we were talking a little bit about this. A lot of times, like with an ABLE account, you’re going to need a diagnosis before you can actually open one. Right. But let’s say that you have a child specifically with developmental disabilities. Like autism, you might have, a diagnosis and you still might not know what your future looks like as far as how independently your child will be able to live. So this, this listener had a question about how do you know when it’s time to consider these things for your child when they are very young and on the spectrum, it’s just so hard to know what their future needs and abilities will be.
And, this listener was just wondering if there was any guidance on how and when to kind of make that determination that you even need a special needs trust or an ABLE account? I think for, at least on the able account, I would think that if you are having trouble accessing benefits, that would be a big sign that it might be time to open one, but I have no idea on the special needs trust end.
Brenton: You know, there are a significant number of families who are placed in these positions either because of something that a pediatrician might see or that, uh, you know, someone at their daycare might see where they express a concern. The child is too young to be formally diagnosed with certain things, depending on the procedures of whomever they’re referred. So, you know, I talked about having a child who was says, Hey, you know, we think that your child might have some things that we need to watch out for. Let’s go get their hearing tested. And then the person, you know, from that facility might say let’s send them to a speech pathologist or let’s send them to any of these other organizations that might be early intervention, but they might also say we are not at the age for which we test.
So it might be, Hey, I don’t have something that I can formally point to, to qualify for this type of account, but I am thinking about it. And to me, the first time that concern is expressed is when you need to start considering it. It doesn’t necessarily mean that you have to start setting up formal accounts, but it may mean that you need to start looking at your entire financial portfolio to consider where’s the best place to place these funds if that need actually is formalized.
So like I said, If I have someone who’s saying, this is what they’re thinking, we may not know for a year or two, for sure. Then we might start the conversation of how much are you putting in your retirement accounts? What does your life insurance look like? And maybe we get to the point where those changes are needed and we can go back to the way they were handling their finances before.
But if you know, two years after the thought arises, it turns out that those items are needed. We’ve already started making preparations. So to me, whenever the concern pops in your head is when you need to start saying, all right, I need to sit down with either a professional or I need to just look at what I’m doing myself to make sure that I’m prepared.
Jill: Completely agree. I think it’s, it’s planning. Sort of knowing that there may be eventuality, that that child may need means tested benefits. So when you’re starting your savings, you’re making sure that you’re never putting more than $2,000 in the name of that child, but it may be that you’re waiting on some of the bigger items.
It may be that, you know, at age 18, you realize that they’re going to need SSI. So you’re looking five years before that. So around age 13, should I be planning to have a special needs trust? Should I be making sure that some of these different avenues are in place? Oftentimes clients are coming to me when that child is reaching that age of majority.
And there’s a lot of decisions that need to be made at that point when they may be moving from, you know, just receiving medical assistance as we have in Pennsylvania to applying for SSI as an adult. And that changes the field that makes it so that not only do the assets that they have, but what the parent may have are important.
And that triggers that future look of how do I preserve those benefits by how my planning affects it. So looking back, do I need to put that, you know, special needs trust in place now, because if something does happen, then those benefits would be, would be lost. So it’s, it’s definitely over time and you just don’t know, especially with kids with autism, it’s like a rollercoaster of ups and downs of amazing accomplishments and then determining that things may change. You know, you just don’t know what the future holds, but having a fluid plan where you always keep in the back that, you know, this means tested benefit needs to be protected. And that’s how I’m planning is important because if you’re creating, I do a lot of these trusts that they can be changed.
So you can create a special needs trust, a third-party trust. And if that child doesn’t need it, you just go in and change your will. You, you make a new provision and you change the trust because that’s where the funding issue comes. Oftentimes we don’t want to start funding these things until we have some definitive answers on what that future may hold and what those needs might be.
Brynne: I’m wondering a little bit about why you might want to wait to fund them. If there, if there’s a question about, I don’t know if my child is going to be able to live independently and they’re eight, right. And they’re on the spectrum. And there’s just no way to tell that right now. What if I pass away before they reach that age of majority, would I want to set up the special needs trust just in case there’s obviously some disconnect for me, like as a parent and maybe I’m also just an overly cautious person when it comes to my finances.
So I’m like, I want to prepare and make sure that they definitely won’t have SSI threatened. And if they, if they hit that age as majority and they don’t need it protected, great. It’s already in there. It doesn’t matter. But it sounds like there’s a good, extremely valid reason for waiting to fund that.
And I’m just wondering if you can educate us a little bit more about what that reasoning might be.
Jill: Waiting to fund the trust, oftentimes when you’re, you know, your going and providing for yourself and your child and all the things they need right now, you need that liquidity right now. So typically parents wait until after they pass, because they know that while they’re they’re living, they’re going to do what they can to provide for their child and supplement what those means tested benefits are providing.
So that’s why we often do what’s called the dry trust. It’s there. It’s ready. It’s waiting. You’ve got all your beneficiary designations pointing towards it, funding it when it needs to be when you’re not there anymore, but that is one factor, but there’s also another factor that trusts are not people and they pay taxes at different rates.
So if you start to fund the trust now, and it’s got its own tax ID number, and once it’s funded, it’s irrevocable. It’s paying taxes at a much higher rate. So those funds, if they distribute through to a, to a beneficiary can be taxed at the individual’s rate, but if they’re staying trapped and growing in that trust, they’re going to pay higher rates.
So there’s some more complex reasons why you might not want to start funding the trust right away, especially like my situation where I need those funds right now to be able to provide for my kids. And if I had to pick between two, I’m going to pick the one that is most necessary currently.
Brynne: Thank you for clearing that up.
That just like answered everything. So we have, we have this other question from a listener. This listener is most concerned about the emotional support that her child is going to need after she is gone. And I’m wondering. She’s worried about planning for that within estate planning, right? I’m wondering how you even start to think about tackling that because again, depending on your state and how accessible their Medicaid and Medicare programs are, that might be an expense that you ended up paying yourself.
And that can be quite an expensive one. So I’m just wondering how, how you guys kind of work with clients to plan for those big needs. Think about those, those long-term supports that might be there for some families.
Jill: When you say emotional support, an example of, of something that would be an individual would need, you know, like supports for daily living activities or, um, being, you know, thriving in the community through work.
A lot of those are provided for with their waiver funds, which is a combination of federal and state funds that allows you to access that medical assistance in the community versus in an institutional setting. Now in Pennsylvania, these are hard to come by. There’s lists, you’re waiting. And so that is a valid concern that, that you can get the monthly SSI and you can get your medical benefits, but all those supports that, you know, our children may need in the community may not be accessible until you reach like urgent or emergency status on the waiver list.
And I don’t know about other states. Maybe someone can help me out there, but I know in our state that that’s, that’s crucial. And even right now, There’s a direct support professional crisis, finding individuals that can be there to care for your loved one and provide the care that you did and would like to see continued may not be accessible even with those funds.
So there’s a lot of moving factors that constantly change. So yes, that is a concern that the trust may need to cover those expenses that typically would have been found through other areas. So I usually start with, when I work with a client is saying, what do we know is accessible? What are the services that can be provided?
Who are the people that you want to put in the life of your loved one to allow them to thrive, to, to live the best life that they choose to live in the way they want to live. And then you sort of work backwards. What would that cost? Who would those people be? And you talk through all of that. I have a great client right now who happens to also be my friend.
And she is a whole team together of individuals that she brings, including her financial professional, me as the attorney, her supports coordinators, everyone meets on the same page and they have like this great binder of information. So, so much of this is finances, but so much of it is within our hearts as parents.
And we have to look into the big picture.
Brenton: I would, I agree wholeheartedly. And when you talk about what does each professional or each resource that’s in your circle provide on my end, I’m just focused on, can we find a way, however, you know, limited resources may be to put as much money on the table if this were to occur.
So that whomever is in that group. Can focus on loving your child. You know, I come from a huge family in Nashville, uh, cousins, aunts, uncles, grandparents, all over the place. So to me, if something were to happen to me or my spouse, I thankfully have no concerns about who would be around my child, loving my child in terms of family.
I don’t want them also trying to be professionals and making sure all of these distributions are qualified, if that were a need. So to me, I wouldn’t want people to assume, like you said, Hey, I’m so worried about this. There is someone out there that will spend an hour of their time to talk with you and not charge you or charge you a discounted rate because they care.
And to me, I would just say, find those people. There’s someone in your area. There’s someone that you can do a zoom call with, who cares enough to take the time to say, Hey, what can we do?
Jill: Finding those people is important and thinking about it in advance. I know I don’t have a huge support system for me and my kids.
It’s just us here. Family is far away. And I know a lot of my clients feel they’re very blessed to have large family networks, but oftentimes, um, raising kids. You know, you isolate yourself a little, you lose a lot of those connections. It does become difficult. And it’s definitely a conversation to have to start thinking about now and talking to those family members when you have that extended family member and figuring out who these people are, just like, we have to look at who can be a trustee, who are the people that are important to provide that support so that the finances that you’re providing are complimented by like the sustaining of the emotional side as well.
Brynne: Absolutely. And that I do feel like that’s such a huge thing. Like when a lot of people, when their child is diagnosed, their social network shrinks, whether it’s because people just don’t know how to act. Or because, you know, you do, you go through a little bit of, you isolate yourself a little bit, but all the more reason to build, to build that social network now, just like you guys are saying, and also with the, the emotional supports, like, I think some of the things we were talking about, some of those career services might be covered by your state, vocational rehabilitation, service, whatever your state calls that office. How they spend those funds are going to be different, not only from state to state, but also from now to 60 years when your kids might be accessing it after you’re gone.
So it’s very complicated to talk about that at a high level, because in all 50 states, you’re going to have slightly different policies at any given time. But I think protecting your assets, it sounds like is probably the biggest thing that you can do, because if you can protect those assets, you can protect your child’s access to some of these programs that in some states might be paid for through Medicaid or might be paid for through all these various state programs.
Joyce: So I am a mom of four and my kids are in the spectrum. So I have an adult she is living in New York and then I have my little boys, right. So when I got my life insurance, my two youngest were not born. And then diagnoses came.
So for me, I’m just listening in and I’m like, okay, this is what I need to do because…where can I find — me as a mom working with all these children –where can I go online to look for insurance? Where do I find you guys?
Brenton: For the life insurance or for the professional services?
Joyce: insurance and for services. So for example, I have life insurance.
I never thought of doing what you just said to do. Right. I never realized, once I thought the money was in there was in there. Andd then it never dawned on me that I could use a company . I was just like, wow, I need to think about this. So where can I find someone like someone, like you guys? Where – like online or? Tell me about it.
Brenton: Jill, if you tackle the, the trust resources I can tackle the insurance.
How about that?
Jill: So when you find that professional, like when I’m working with a client, um, a lot of times people find me by word of mouth, you know, you can do an internet search for special needs attorneys. There are some special needs planning organizations out there, word of mouth from other parents, podcasts like this.
In our area, there’s, you know, you can search for nonprofits that handle special needs trusts. It’s hard because, you know, through my experience and dealing with vast number of clients, you get to know certain trustees and you get to know certain organizations and how everyone’s handled and what they do with their finances.
So, you know, there isn’t one master location to find this, but when you’re working with that professional to create that trust usually they’ll have a good idea. Like I, I know if someone’s got X amount of dollars and they want to be in this many states, this trustee will work with this financial advisor. I know if you’re in Western Pennsylvania, these are the nonprofit trustees in our firm is based out in the Eastern part of the state in Berwyn.
They have a whole list of many trustees that families can work with. So, you know, it’s just finding that professional that can lead you in the right direction. And just knowing now that you’ve listened to all these terms, what are some good questions to ask so that you’re gauging whether you like that.
And it all goes back to a Brenton said in the beginning is having that connection and feeling comfortable because with trustees having that person, but also that company is trusting them and feeling comfortable with them because trust officers may come and go, but their ideology will essentially stay the same, how they handle clients, what they do.
So it’s finding them and then feeling comfortable with them.
Brenton: And for me not to minimize my role in all of this, but the role of a financial advisor for a family who are going through these things is in the support capacity to people like Jill, to people like the attorney, to people like the trust officer. So to me, the trustee. So to me, if you’re saying maybe I have access to a Jill, but I don’t have a financial advisor that I’m comfortable with when it comes to things like the life insurance there, there are non-profit entities out there that at least educate life happens is, is one resource lifehappens.org where you can go and use insurance calculators to figure out what an appropriate amount of life insurance might be.
And then there are organizations that will allow you to apply for those online. Even without an advisor. I think of services like policy genius or all these websites that are popping up where you can go and apply on your own, or you can go and you can find an advisor and you can have an interview with them.
When people who are interested in coming to my firm schedule, the first meeting, the first meeting is for us to get to know each other, because they may not be a fit or they may be a fit. And they just don’t like the vibe that they’re getting when they work with me for whatever reason. So you want to be able to have the confidence to go in and say, what services do you offer?
What experience do you have serving families with similar concerns to mine, how are you compensated? Because people have their preferences in terms of do they want to work with a fee only advisor versus a fee-based advisor. and try to find that fit. And if you find that fit, that advisor may be able to shepherd you through the process of finding the right company.
When people are looking for insurances and financial tools on their own, without advice, they often look at the most cost-effective option as if it’s the best option, but there may be details about that policy, about that company that a professional can come in and say, Hey, I understand that that’s $15 a month less than this company, but there’s a reason why, and we need to at least talk about that reason to make sure it’s still appropriate.
Jill: I do want to throw one thing out that is completely different than the topic we just talked about, which is how important it is when you think about creating a special needs trust in Pennsylvania. And I don’t know if it’s the same across. When parents themselves need to access medical assistance over 65.
So you yourself need skilled nursing over 65. Oftentimes if you have a child with a disability, you can access those means tested benefits for yourself by funding a special needs trust for your child. People don’t often know that. So if you have a grandparent that needs medical assistance or a parent, you know, I just want to put that on the radar.
That that is an option in the future because oftentimes those of us, you know, we worry about what will happen to us. If we need medical assistance means tested benefits and having a child that’s also receiving them can, can be beneficial in your access to that. Just a far off thought that I thought I’d throw in because we’re talking about creating the trust now, but that type of trust has to be like a sole benefit trust there’s requirements on it, but it’s definitely something to keep in mind.
Joyce: So for me, cause we always focused on putting money and saving money, but sometimes our income is not enough making sure that we increase our life insurance and then using that to grow the wealth, to make sure that my kids are okay after my husband and I are gone. So that was something because no one, you can read everything you want to read about personal finance, but no one will tell you this because we have this such, this, this mentality that we have to save now, but about for the future, but for someone that has low income, having a life insurance and then using that money.
To help your children is hardly ever discussed.
Brynne: No, definitely. And I was even doing some math after that. And I was looking at for, you do have to pay premiums for life insurance every month. Right. And there’s different types of policies you can get, and you should probably sit down with a financial planner to figure out which combination of policies is best for you.
So like, I think that investing is super important. Definitely invest if you can, but we’re talking about a population of people here who our income is severely stunted because of the external societal circumstances that we live in. And so if you can’t invest, definitely, definitely up that life insurance policy, because that was so huge.
I had never thought of that before. And also
Joyce: And also remember to make sure that you check for your financial advisor depending on the state. For clawbacks on Medicaid and your trust fund. So I will recommend that you always check that and make sure that you have a plan in place.
Brynne: for sure for sure. And like they were talking about if grandma passes away, right.
And grandma wants to leave her life insurance money to your kid. If she does that and just leaves it to your kid in their name? You can create that first party trust, but it’s going to be subject to that Medicaid clawback. So if you can talk to grandma as she’s estate planning, or you can talk to family members who want to help you out before they’re actually putting together their own legal documents, then you can set up that third party trust.
And then you won’t have to worry about the Medicaid clawback. So that’s something that like, isn’t just like your financial planning, but also communicating that to your family and to other people in your community who want to help support you and your kid. So if you guys enjoyed this podcast episode, it’s super helps us out if you can leave us a five star review on apple podcasts. And we also want to invite you to subscribe to our email list. You can do that by going to MomAutismMoney.com. And if you are autistic or the parent of an autistic child or somebody else who is concerned with the finances, please do join our Facebook group.
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