Having a disabled loved one can be a challenging experience, especially regarding financial planning. As a caregiver, it’s crucial to consider their long-term financial stability and ensure they are financially secure. The cost of living with a disability can be high, and it’s essential to be proactive in financial planning to ensure their needs are met. In this guide, we’ll explore how to plan financially for a disabled loved one’s future, including various options and steps you can take to ensure their financial well-being.
1. Understand their disability Benefits
When planning for a disabled loved one’s future, it’s essential to understand the various disability benefits available. These benefits can provide financial support to help cover the cost of medical care, transportation, and other expenses related to their disability. Here are some of the most common disability benefits to consider:
- Social Security Disability Insurance (SSDI): SSDI is a federal program that provides financial assistance to individuals who cannot work due to a disability. To qualify, your loved one must have worked for a specific number of years and paid Social Security taxes.
- Supplemental Security Income (SSI): SSI benefit is another federal program that provides financial assistance to disabled individuals who have limited income and resources. It’s designed to help cover basic living expenses, including food, shelter, and clothing.
- Medicaid: Medicaid is a joint federal and state program that provides medical coverage to individuals with low income and limited resources. Your loved one may qualify for Medicaid if they meet specific income and disability requirements.
2. Create a Special Needs Trust
Another critical aspect of financial planning for a disabled loved one’s future is creating a special needs trust. This type of trust can help protect your loved one’s assets and ensure they are used for their benefit. Here’s what you need to know about creating a special needs trust:
- A special needs trust is a legal arrangement that allows you to set aside funds for your loved one’s care without affecting their eligibility for government benefits.
- You can name a trustee to manage the trust and use the funds for your loved one’s expenses.
- There are two types of special needs trusts: a first-party trust and a third-party trust. A first-party trust is funded with the disabled person’s assets, while a third-party trust is funded with assets from someone else, such as a family member.
- Working with an attorney that specializes in special needs planning is essential to ensure that the trust is created correctly and meets your loved one’s needs.
3. Get a Life Insurance
Life insurance can also be essential to financial planning for a disabled loved one’s future. Life insurance can provide a financial safety net for your loved one and help cover expenses if you were to pass. Here are some things to consider when it comes to life insurance:
- If you’re the primary caregiver for your loved one, it’s crucial to have life insurance to ensure that they are taken care of if something happens to you.
- You may consider a life insurance policy specifically designed for people with disabilities.
- It’s essential to name a beneficiary who will receive the funds from the policy after you’re gone. Consider setting up a trust to manage the funds and ensure they are used for your loved one’s benefit.
4. Plan for Estate and Inheritance
Estate planning is an important consideration when it comes to financial planning for a disabled loved one’s future. Estate planning involves the creation of a will, trust, and other legal documents that outline how your assets will be distributed after your death. Here are some key things to consider when it comes to estate planning:
- Work with an attorney specializing in estate planning to ensure that your loved one’s needs are considered when creating your will and other legal documents.
- Consider creating a trust to manage your assets and ensure they are used for your loved one’s benefit.
- Be sure to name a guardian for your loved one if they are still a minor or unable to make decisions for themselves.
5. Maximize Government Benefits
In addition to disability benefits, other government benefits are available to help support individuals with disabilities. Here are some tips for maximizing government benefits:
- Work with a financial advisor or attorney who specializes in disability planning to ensure that you are taking advantage of all available benefits.
- Consider setting up an ABLE account, a tax-advantaged savings account that can be used to pay for qualified disability expenses.
- Keep detailed records of your loved one’s medical expenses and other disability-related costs to maximize your tax deductions.
6. Get Help from a Financial Advisor
Navigating the complex world of financial planning for a disabled loved one’s future can be overwhelming. That’s why it’s essential to work with a financial advisor with experience in disability planning. Here are some benefits of hiring a financial advisor:
- A financial advisor can help you create a comprehensive financial plan that considers your loved one’s current and future needs.
- They can help you navigate government benefits and other financial resources available to individuals with disabilities.
- They can provide ongoing support and guidance as your loved one’s needs change.
Q: Can I leave a large inheritance to my disabled loved one without affecting their eligibility for government benefits?
A: It’s essential to work with an attorney who specializes in disability planning to ensure that your loved one’s inheritance is structured in a way that won’t affect their eligibility for government benefits.
Q: Can I set up a special needs trust for my disabled loved one without the help of an attorney?
A: While it’s technically possible to set up a special needs trust independently, it’s not recommended. Working with an attorney specializing in special needs planning can ensure that the trust is created correctly and meets your loved one’s needs.
Financial planning for a disabled loved one’s future is essential for ensuring their long-term financial stability and well-being. By understanding the various disability benefits available, creating a special needs trust, and maximizing government benefits, you can help provide for your loved one’s needs now and in the future. Remember to work with an attorney, an insurance agent or a financial advisor who specializes in disability planning to ensure that you’re taking advantage of all available resources and creating a comprehensive financial plan that meets your loved one’s unique needs.
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