​Getting benefits through the Social Security Disability Insurance (SSDI) program is a great relief to a person under age 65 who is unable to earn a living because of a disability. Its monthly payments guarantee some degree of financial security.
An added benefit to SSDI is health insurance coverage through Medicare. But there is a precarious two-year gap between receiving approval for disability benefits and becoming eligible for Medicare’s insurance coverage. The practical impact of this waiting period is that numerous SSDI beneficiaries are temporarily both unemployed because of their disabilities and without health insurance. 

Lower-income SSDI applicants may qualify for Medicaid, especially if they live in one of the 39 states that have expanded Medicaid to include anyone whose income is below 138 percent of the Federal Poverty Level, no disability required.  But this still leaves a large number with higher incomes who can face the life-threatening consequences of going without health insurance during the two-year waiting period. If this is the case for you, what are your options?

First of all, it might be possible to at least narrow the two-year gap by harnessing any delays in getting your case heard by the Social Security Administration (SSA). If, for example, you were on a waiting list for six months before a hearing with an ALJ (administrative law judge, the SSA official who adjudicates SSDI cases), that period might be counted toward the two-year delay in receiving Medicare coverage. In this instance, that would leave an 18-month period to cover.

Another possibility is individual insurance purchased on the exchanges made possible by the Affordable Care Act.  Although coverage can be expensive depending on where you live, be sure to research your options. You may be eligible for government subsidies to help you pay the premiums for an individual health plan if your modified adjusted gross income (MAGI) ranges from 100 to 400 percent of the previous year’s federal poverty guidelines.

The subsidies are tax credits that are available to help middle-income and low-income people afford health insurance when they don’t have access to affordable employer-sponsored coverage or government-sponsored coverage (Medicaid or Medicare). Most eligible enrollees take those tax credits in advance, paid directly to their health insurance carrier each month to offset the amount that has to be paid in premiums.
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It goes without saying that no one, least of all someone with disabilities, should be without health insurance coverage. With careful planning and research, you may manage to navigate this insurance gap at little or no cost. Be sure to consult with a special needs planner, who can advise you on your qualifications and the laws in your home state.

​In its first three weeks in office, President Biden’s administration reversed a range of high-profile Trump Administration regulations that affected people with disabilities -- rules covering Medicaid, disability reviews, immigration and housing discrimination.

Medicaid work rules: Since 2018, the Trump Administration had been pushing states to enact work requirements for certain Medicaid recipients to maintain benefits. In Arkansas, the only state that enacted these requirements, the program resulted in 18,000 people losing Medicaid coverage in three months before a court put the program on hold. This included many people with disabilities, despite being ostensibly exempt from the rules.

According to sources, the Biden Administration will withdraw the Trump Administration’s permissions to states to enact work requirements or invitations for states to apply for waivers to enact such requirements. It will also rescind existing waivers for Arkansas, Kentucky, and New Hampshire. Courts have uniformly ruled that the Medicaid Act prohibits these work mandates, although the question is now in front of the Supreme Court.

Disability reviews:  On January 28, 2021, the Social Security Administration (SSA) withdrew proposed regulations that would have subjected certain Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) recipients to more frequent reviews to ensure people receiving benefits still have qualifying disabilities. The SSA currently requires these reviews on a seven-year, three-year, or six- to 18-month basis, depending on if the person is classified as “Medical Improvement Not Expected,” “Medical Improvement Possible,” or “Medical Improvement Expected.”

The proposed regulations would have created a new category, covering an estimated 4.4 million people, called “Medical Improvement Likely.” These recipients would have been subjected to reviews every two years, and the every-seven-year requirement for people in the “Medical Improvement Not Expected” category would have been shortened to six years. Disability advocates, who had characterized the proposed rules as a way to harass SSDI and SSI recipients, applauded the SSA’s withdrawal of the proposed changes.

Public Charge Rule: President Biden signed an executive order February 2 ordering a review of regulations finalized by the Trump Administration that would permit the federal government to deny people citizenship on the grounds that they may be a “public charge,” meaning they are likely to need government benefits. While existing laws already permit the government to deny people citizenship on this basis if they are likely to need SSI, the Trump Administration’s regulations expanded the “public charge” definition to encompass people who have received or may need SNAP (food stamps), Medicaid and other benefits that many people with disabilities rely on for help.

For many advocates, the rules harkened to a time when immigration laws systematically excluded people with disabilities. The rule was also credited with sparking a significant drop-off in non-citizens seeking medical care out of deportation fears.

Housing discrimination: On January 26, President Biden issued an executive order rescinding proposed Department of Housing and Urban Development (HUD) regulations that would have made it significantly harder to prove discrimination under the Fair Housing Act (FHA). The proposed regulations targeted claims where discrimination is proven not by showing the intent of a policy but by demonstrating the policy’s discriminatory effects, such as through statistical analysis and other evidence. The Trump Administration would have created a higher, “robust” standard for plaintiffs to make FHA claims, thus making it significantly harder to prove housing discrimination based on disability.
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Disability discrimination claims have long been the most frequent type of claim brought under the FHA. They have traditionally been used to successfully challenging everything from bank lending practices, to landlords discriminating against people with housing subsidies, and zoning ordinances that limit the placement of group homes.

​How do cities stack up for people with disabilities seeking the best place to live? Which provide the most accessible sidewalks, transportation, entertainment, and parks? Which score high for low-cost housing, jobs, public hospitals, affordable home attendants, or a plentiful supply of doctors, therapists, and other services?

To help answer those and more questions, the consumer finance website WalletHub has issued its latest annual Best &Worst Cities for People with Disabilities. It assessed 182 major U.S. cities—including America’s 160 largest urban centers—scoring them on each of 34 key measures of disability friendliness under three main categories: Economy, Quality of Life, and Health Care.

Scottsdale, Arizona, tops the Best & Worst list overall, followed by St. Louis, Missouri, and, in third place, South Burlington, Vermont. At the bottom is Bridgeport, Connecticut, preceded by Gulfport, Mississippi, and, third from bottom, Providence, Rhode Island. But the survey delves a lot deeper for those seeking specific qualities in a city. For instance, Portland, Oregon, is number one for Quality of Life, followed by San Francisco, but both cities, notoriously lacking in affordable housing, rank 173 and 156, respectively, under Economy.  Similarly, Bismarck, North Dakota, is tops for Health Care, but 153 for Quality of Life. Virginia Beach, Virginia, comes first under Economy but ranks only 163 for Health Care.

The survey goes into even greater detail on specific issues important to people with disabilities. For instance, the most affordable cities for doctor visits are Laredo and Plano, both in Texas, and Virginia Beach, while the most expensive are Fargo, North Dakota; Anchorage, Alaska; and Tacoma, Washington. The cities with the highest percentage of people with disabilities living in the area are Cleveland, Ohio; Lewiston, Maine; and Huntington, West Virginia, while Santa Ana, California; Gilbert, Arizona; and Plano, Texas, have the lowest. The cities that are best when it comes to public parks within walkable distance are San Francisco, Boston, and New York.

To see how your city compares and learn more about the methodology used to arrive at the rankings, go here.
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For an article about WalletHub’s 2018 survey, click here.

Retirement plans often make up a significant portion of the assets of parents of children with special needs, or of individuals who have become disabled as adults.  In such cases, the question arises as to whether the retirement plan can be put into a special needs trust. The answer, as with many legal questions, is "it depends." Also, the answer has changed significantly since passage of the SECURE Act at the end of 2019.

There are three different questions that need to be answered:

• Can you transfer your own IRA or 401(k) into a special needs trust?
• Should you name a special needs trust as the beneficiary of a retirement plan?
• Can you transfer an inherited IRA into a special needs trust?

Can You Transfer Your Own IRA or 401(k) into a Special Needs Trust?
This question normally comes up for people who become disabled, whether due to injury or illness, after they have worked and accumulated retirement savings. The answer is a clear no. A disabled person cannot transfer a retirement plan into a special needs trust without first liquidating it and paying taxes on the realized income. If paying the taxes owed is necessary in order to shield the funds in a special needs trust and receive important public benefits, it may well be worth the cost. In fact, the tax cost may not be as high as it seems at first depending on the size of the retirement plan, the individual's other income, and whether medical expense or other deductions are available.

Should You Name a Special Needs Trust as Beneficiary of Your Retirement Plan?
More often, parents would like to leave all or part of a retirement plan to a trust for the benefit of their child with special needs. This can be done, but it's a bit complicated. Before passage of the SECURE Act, special needs planners would advise clients to avoid doing so, if possible, to keep the trust simpler. In order to be the beneficiary of a retirement plan and spread the plan withdrawals out over the beneficiary's lifetime, the trust must qualify as a so-called "accumulation" trust, which presents certain challenges. To avoid this, clients might name their non-disabled children as beneficiaries of their retirement plans and name the special needs trust as beneficiary of other assets.

However, the SECURE Act made it more difficult to stretch out retirement plan withdrawals for the lifetime of most beneficiaries, limiting the withdrawal period to the 10 years following the death of the primary owner. One of the exceptions is beneficiaries who qualify as disabled. So now, in many cases, planners give the opposite advice. If possible, the retirement plan should be payable to the special needs trust so withdrawals and the payment of taxes can be spread out over the disabled beneficiary's lifetime. In each case, the special needs planner and the client must balance the potential tax savings with the added complication of creating and managing an accumulation trust.

Can You Transfer an Inherited IRA to a Special Needs Trust?
Perhaps you have a special needs trust and have inherited an IRA. Can the IRA be transferred to your trust without having to be liquidated first? Here the answer is less definite. There's no regulation that directly answers this, but there are IRS rulings that have permitted such a transfer without having to liquidate the IRA first in individual cases. Absent a regulation that directly addresses this, the challenge may be less the law and more the willingness of the bank or investment firm where the account is located to permit such a transfer to the trust. They may well first require that the account owner obtain a ruling from the IRS that is specific to the account in question. The cost of obtaining such a private “revenue ruling” in most cases would outweigh the potential benefit of making the transfer to the trust.

​As you can see, the subject of retirement plans and special needs trusts is a complicated one.  If you want to know how a retirement plan can fit with your or a loved one’s special needs trust, talk to your special needs planner.

​The Internal Revenue Service (IRS) has issued final regulations covering tax-free savings accounts that allow people with disabilities and their families to save and pay for disability-related expenses without jeopardizing eligibility for Medicaid, Supplemental Security Income (SSI) and other government benefits.

Passed by Congress in December 2014, the Achieving a Better Life Experience (ABLE) Act  allows families to set aside up to $15,000 annually (up to $100,00 in total) in so-called ABLE accounts.  The accounts function much like Section 529 college savings accounts, except that rather than paying for educational expenses, money in ABLE accounts is to be used for a wide range of “qualified disability expenses.”  And, unlike a special needs trust, an ABLE account can be managed and controlled by the beneficiary.

The IRS first issued proposed regulations for the ABLE Act in 2015, and then published revised regulations in October 2019 following passage of the Tax Cuts and Jobs Act (TCJA) in December 2017.

The final regulations contain no major surprises.  They incorporate most provisions in the earlier sets of regulations while clarifying certain other provisions.  As provided in the revised regulations, families may roll over money from 529 accounts into ABLE accounts. Account holders who are working may contribute their own money from their incomes above the $15,000 annual cap, up to the federal poverty limit.  The $15,000 cap is tied to the annual gift tax exclusion, which will rise in coming years. And certain low- and middle-income account holders may be eligible for a tax credit, known as the Saver’s Credit, for the first $2,000 in contributions ($4,000 for couples) to an ABLE account each year.

The final regulations, which total 174 pages, also further clarify numerous other provisions of the ABLE Act. For example, the regulations provide that an ABLE account may be set up by the beneficiary, by the beneficiary’s agent under a power of attorney, by certain family members, or by representative payees appointed by the Social Security Administration. The person creating the account is responsible for certifying that the beneficiary is a qualifying person with a disability for the purposes of coverage under the ABLE Act.  

The final regulations also preserve the broad definition of “qualified disability expenses,” referring to the type of expenses that funds in ABLE accounts can pay for. ABLE accounts can be used for a wide range of expenses, including food, housing, assistive technology, transportation, and educational services.
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Click here to read the full final regulations, which generally take effect January 1, 2021.
Click here for a directory of state ABLE accounts.
For more on ABLE accounts, click here, here, and here.

Katie Clancy was ​honored to be a part of this panel discussion about how to plan legally and financially for children and adults with disabilities, sponsored by PediaTrust

Parents of a child with special needs know that they must plan for the child’s care and support way into the future. This is especially so if the individual is unlikely ever to be able to earn an income.
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But what happens in cases of divorce? How does the issue of child support come into play, now and in the future, when the child is no longer a minor? Before you start the separation process, be sure to understand the answers to the following key questions.

What is the role of child support? Any divorce involving children must take their needs into account. Usually, the noncustodial parent is required to provide money to the parent who has custody of the children. The purpose of this support is to provide the same degree of financial security that the children had prior to their parents’ separation.

How long does child support last for a child with special needs? In most cases, child support ends when children reach the age of majority and can earn their own living. But for those who will never be able to earn an income due to a permanent disability, support obligations can continue into the future, beyond childhood.

Although family law varies from state to state, in most cases courts will recognize the parents’ obligation to support their special needs child even in the event of a divorce. This extends beyond childhood for those who require money for their care and support throughout their lives, and a portion of this funding is supplied by the noncustodial parent per the original divorce settlement.

Are there exceptions to child support once the person with special needs becomes an adult? Yes, depending on when the disability occurred. If the person became disabled as an adult, no child support payment would apply as part of a divorce settlement.

Courts will also look at the financial resources of the child with special needs. If these are sufficient to pay for that person’s care and living expenses into the future, the noncustodial parent may not face support obligations, unless the assets are all held in a special needs trust.

How would a special needs trust affect child support requirements? Courts generally don’t take income and assets in a special needs trust into account when determining the amount of child support to award the custodial parent.

Will ongoing child support affect the individual’s eligibility for Supplemental Security Income (SSI)? Because access to SSI depends on a beneficiary's income and resources, even small increases in income can cause a reduction or loss of SSI benefits. Unfortunately, when an SSI beneficiary’s parent is ordered to pay child support, those payments can end up ruining the beneficiary’s access to government benefits. To protect against this outcome, it may make sense to create a special needs trust for the child’s benefit. The court can then order the non-custodial parent to make support payments directly into the special needs trust. The trust will shelter the income and allow the beneficiary to retain SSI benefits, and, in many cases, the support payments can be retained in the trust if not immediately used.

How might estate planning figure in? In many cases, courts will require that the noncustodial parent provide for the special needs child in his or her will.
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If you are in the beginning stages of separation or divorce, and you have a child with special needs, it is important to plan long into the future. Make a point to fully understand these key questions as you talk to your special needs planner and your divorce attorney.

Like millions of other Americans, recipients of Medicaid and Supplemental Security Income (SSI) have received or should soon receive a one-time $1,200 coronavirus relief payments from the federal government.  And, if Congress can come to an agreement, a second round of economic impact payments will be coming.  (If you haven’t received your payment and did not file a 2019 tax return, click here to access the IRS’s page for non-filers.)

Although this money does not immediately affect eligibility for means-tested programs like Medicaid and SSI, if the money is not spent within 12 months it will count as an asset and could affect eligibility.

One solution is to put the funds in an Achieving a Better Life Experience (ABLE) account, where it can remain without affecting eligibility for programs like Medicaid and SSI.  Authorized by Congress in 2014, ABLE accounts are a tax-advantaged way to put money aside for dependents with disabilities.  Funds in the accounts can be spent on a wide range of disability-related expenses without compromising eligibility for government benefits. Unlike a special needs trust, an ABLE account can be managed and controlled by the beneficiary. 

Not everyone with a disability can qualify for an ABLE account, however.  Eligibility is limited to people who developed their disability before age 26. Also, total contributions to ABLE accounts are limited to $15,000 per year, although beneficiaries who work can make ABLE contributions above the $15,000 annual cap from their own income up to the Federal Poverty Level. If the value of the account exceeds $100,000, any SSI income is suspended until the account dips below that limit.  These savings plans may be used for a broad array of products and services related to the eligible individual’s disability.
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For help opening or investing in an ABLE account, please give us a call.

Among the challenges of raising a child with special needs is figuring out how to provide for that child once you’re gone. If the child will never be able to earn a living, how can you determine how much of your own money to set aside for her care and support, and for the rest of her life?

One way to answer this question is through a free online calculator launched this summer by Harty Financial, a Boston-area financial services firm that focuses on planning for families of special needs children.  Utilizing a three-minute questionnaire, the calculator is designed to guide parents through the estate planning process by assessing the cost of everything their child with special needs is likely to need for the duration of his life, anything from medical assistance to food and shelter, clothing, physical therapy, education, and entertainment.

Planning the long-term future of a child with special needs can be the source of enormous stress for parents embarking on the estate planning process, the company’s principals note. And while the calculator is not designed to replace one-on-one consultation with an experienced special needs planner, it can help answer some basic questions and move the process forward, they say.

What we think is really helpful about this calculator,” says Harty Financial co-founder Brendan Harty, “is that it utilizes our own observations about actual costs that parents face, such as housing and lifestyle preferences, rather than asking parents to supply those numbers themselves.”

The calculator, available at www.specialneedsmap.com, asks the user a series of questions about the child’s needs as well as the parents’ expected longevity and financial profile.

Though there is no substitute for planning with a family on an individual basis, we believe that this calculator has the potential to be transformative to the millions of Americans with a child with special needs,” says Caleb Harty, Brendan’s brother and a co-founder of the firm. “Our objective is to help parents check off the peace-of-mind box, and getting an idea of how much money parents may need to leave behind is one step toward that goal.”

Once the parents of a child with special needs have a clearer idea of this figure, they can begin their planning. They can set money aside in a special needs trust, for example, or apply for life insurance to make sure there will be adequate funds should they die unexpectedly. They may want to make decisions about ongoing care and housing for their child with special needs based on what they can afford now and into the future.