Resources to help create a financially secure life for those with disabilities.
Gertie Munholland was just three days old when she was adopted. Her parents, Heidi and Nick Munholland of Milliken, Colorado, knew before the adoption that she would be born with Down syndrome.
While all parents worry about their children’s health and development, the Munhollands recognize, as Heidi says, that as “special needs parents,” there might be additional issues to deal with over the years. And one of those issues is being prepared for whoever dies first.
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Many of those with disabilities need help managing their daily lives and are cared for by their families. There are government programs and financial vehicles that can help support medical and personal necessities for now and into the future. But how do caregivers decide among the available options? And how do caregivers plan for a day when they may no longer be able to provide care? To ensure loved ones are taken care of, it’s important to work with an attorney and a financial advisor to determine the best way to navigate the system to ensure that loved ones are taken care of.
Special needs planning
Before adopting Gertie, who is now 16, the Munhollands had a financial strategy should something happen to one or the other of them. But Heidi and Nick
Jeffrey Solomonson, a Thrivent financial advisor, “was able to help us out and connect us with everything,” Heidi says. He laid out the available options, which included first- and third-party special needs trusts and Achieving a Better Life Experience (ABLE) accounts.
First-party special needs trust
A first-party special needs trust is funded with assets from the disabled individual, such as from an inheritance in their name. At the individual’s death, proceeds in a first-party trust will be required to first reimburse each state’s Medicaid program from which the beneficiary received benefits. That may deplete the assets in the account. If additional funds remain after Medicaid is reimbursed, the balance can be distributed to other remainder beneficiaries.
Third-party special needs trust
A third-party special needs trust is funded with assets from other loved ones, such as with proceeds from a life insurance policy. Typically, no payback is required from a third-party trust at an individual’s death.
Funds in either type of special needs trust may be used for a wide variety of expenses, including:
- Education
- Travel and recreation
- Assistive and electronic equipment and appliances
- Companion assistants
- Vehicles
Achieving a Better Life Experience (ABLE) account
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How it works:
- The disability must have happened before age 26.
- Annual contributions are limited to the annual gift tax exclusion ($18,000 in 2024) for the person with disabilities, and earnings grow tax deferred.
- Once the account’s value exceeds $100,000, Supplemental Security Income is suspended until the balance drops below $100,000.
- Upon the death of a person with disabilities, any amount remaining in the account after Medicaid reimbursements goes to the deceased person’s estate or a beneficiary and could be subject to income taxes.
The Munhollands also wanted to protect Gertie and themselves with life insurance. As Thrivent clients with membership, the Munhollands were able to gain access to
“We wanted to help make sure funeral costs would be taken care of if something happened to her,” Heidi says. “And if she outlives us, it will go into her trust. If you don’t have these things in place, you worry about your kids.”
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Remember self-care
Caregivers often face burnout as they navigate bureaucracy, daily life with an individual with a disability and their own lives. While creating a financial strategy can reduce stress, it’s important for caregivers to attend to their own personal and emotional needs. Take a walk, get a massage, visit a friend.
Take advantage of community-based programs through county waiver programs that contract with local respite providers. They may provide, among other things, respite care, or a person that is a trained care provider. Thrivent clients with membership can use our Caregiver Resources to find support and tools in your area.
Support groups can offer time away for the children and activities for parents. And grandparents and other relatives and friends can play a large role, too.
“It’s important to plan and be excited about your child’s future,” Heidi says. “It’s actually been cool to have our strategy flow and to know it’s covered and we don’t have to worry about it. It allows us to enjoy all the time we have together.”
It’s important to plan and be excited about your child’s future. It’s actually been cool to have our strategy flow and to know it’s covered and we don’t have to worry about it.
Get started on a plan unique to your situation
Every person with a disability has a unique story. It’s important to work with a knowledgeable professional who can help you find a solution that best fits your situation.
If, for example, a grandparent wants to leave money to a grandchild with a disability, it’s a better option to leave the money to a third-party trust rather than give the money directly to their grandchild. Otherwise, the money would be the grandchild’s asset and could push that grandchild over the income threshold and disqualify them for any government benefits.
Aside from government funding, each state also has its own programs. “Most states’ Health and Human Services websites discuss medical assistance as well as resources for housing assistance and health care plans,” says Cheryl Krinke, a dedicated planning strategist and attorney at Thrivent. For example, her state has Minnesota Supplemental Aid (MSA), “which provides some cash assistance for basic needs. Someone eligible for MSA also may be eligible for the MSA Housing Assistance program.”
To best understand the trust options, parameters, fees and tax implications of your choices, you need a good team, which should include a lawyer and a financial advisor.
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