Mechanics of funding a special needs trust account

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shorty313
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Mechanics of funding a special needs trust account

Post by shorty313 »

Hi all. I’m a bit confused on the mechanics of opening an account related to the special needs trust web just created for my son. My husband and I are cotrustees, and we have designated a friend as successor trustee is something happens to us both. My questions are:
1. Is it better to open a savings account at my bank, or an account at Vanguard where we could either use MMA or invest? I would fund a nominal amount for now. My parents want to contribute to the trust, but haven’t decided yet whether to do that now or upon their death.
2. Is it just a matter of logging into my bank or vanguard and opening a joint account using my/spouse’s SSN and info and titling the account to match the SNT? Or does it need to be in son’s name and SSN? (He’s a minor).
3. Does successor trustees info need to be anywhere in the bank account?

Thanks for any insight!
musicmom
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Re: Mechanics of funding a special needs trust account

Post by musicmom »

Following. I need to learn more.
We have created a SNT in our will for our disabled daughter.
It will be funded only upon our deaths from our estate.

It will be our son's job to manage it then, or hire someone to.

Can you explain the use of SNT for your child before your pasaing?
How would it differ from an ABLE account (if that applies)?
Topic Author
shorty313
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Re: Mechanics of funding a special needs trust account

Post by shorty313 »

musicmom wrote: Tue Jul 20, 2021 12:49 pm Can you explain the use of SNT for your child before your pasaing?
How would it differ from an ABLE account (if that applies)?
My son is 11. We currently aren't financially eligible for disability benefits so we don't need funds in there presently, but he may be eligible for disability benefits once he turns 18. My parents are also in the midst of updating their estate planning and are debating adding to his trust now vs when they pass, so I wanted to have the account open. I also assume (perhaps wrongly?) that it should be opened now (with the minimum bank amount) because (in my state at least) the language of the trust states it is open with a nominal amount. That's where I get confused.

I haven't looked too far into ABLE accounts yet.
musicmom
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Re: Mechanics of funding a special needs trust account

Post by musicmom »

SNT may operate differently according to state. Did an attorney create the trust? They would be able to help you.

We updated our wills when daughter turned 18 and added SNT.
In NJ, it was not required to fund it on creation. If we chose to there would be annual tax returns. Unnecessary in our case.
We provided financially for our daughter throughout childhood.
She received SSI at age 18, which was used for her benefit.

Consider an ABLE account. It is similar to a 529 though funds can be used for more than educational needs.
If your son qualifies for an ABLE, you and your parents can contribute funds (up to $15K per yr?).
The money in an ABLE account does not disqualify a person reciving governmental benefits such as SSI, SSDI, etc.
Im not an ABLE expert at all, so YMMV. But its been working for our family for about 5 years now.
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shorty313
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Re: Mechanics of funding a special needs trust account

Post by shorty313 »

musicmom wrote: Tue Jul 20, 2021 1:51 pm SNT may operate differently according to state. Did an attorney create the trust? They would be able to help you.

We updated our wills when daughter turned 18 and added SNT.
In NJ, it was not required to fund it on creation. If we chose to there would be annual tax returns. Unnecessary in our case.
We provided financially for our daughter throughout childhood.
She received SSI at age 18, which was used for her benefit.

Consider an ABLE account. It is similar to a 529 though funds can be used for more than educational needs.
If your son qualifies for an ABLE, you and your parents can contribute funds (up to $15K per yr?).
The money in an ABLE account does not disqualify a person reciving governmental benefits such as SSI, SSDI, etc.
Im not an ABLE expert at all, so YMMV. But its been working for our family for about 5 years now.
We are in NJ as well. I may be misinterpreting the SNT language but thought it needed to be funded upon creation. I have a call in to the attorney who did our documents to clarify.

We had opened a 529 for him before ABLE account came into being so I never really looked it to it. Will do some further reading, but I thought there was an upper balance that could be reached that would disqualify some benefits.
gtg970g
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Re: Mechanics of funding a special needs trust account

Post by gtg970g »

shorty313 wrote: Tue Jul 20, 2021 2:37 pm We are in NJ as well. I may be misinterpreting the SNT language but thought it needed to be funded upon creation. I have a call in to the attorney who did our documents to clarify.

We had opened a 529 for him before ABLE account came into being so I never really looked it to it. Will do some further reading, but I thought there was an upper balance that could be reached that would disqualify some benefits.
Our attorney here in the state of GA advised us to attach $10 to the trust in order to technically fund it. Other than the $10 the trust will not have any assets until our death or perhaps the death of one of our parents. We will likely use an ABLE account for our son once he turns 18. The ABLE account and trust both have a place in the life planning of a disabled individual. The ABLE account has a pretty low asset limit before funds are counted against the beneficiary for benefits purposes. ABLE money is also subject to Medicaid "clawback" where they can seize leftover funds (if any) once the beneficiary is deceased.
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shorty313
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Re: Mechanics of funding a special needs trust account

Post by shorty313 »


Our attorney here in the state of GA advised us to attach $10 to the trust in order to technically fund it. Other than the $10 the trust will not have any assets until our death or perhaps the death of one of our parents. We will likely use an ABLE account for our son once he turns 18. The ABLE account and trust both have a place in the life planning of a disabled individual. The ABLE account has a pretty low asset limit before funds are counted against the beneficiary for benefits purposes. ABLE money is also subject to Medicaid "clawback" where they can seize leftover funds (if any) once the beneficiary is deceased.
We have a schedule A at the end that says it has $10. I was assuming I needed to open an account with at least $10 at this time. Perhaps this isn't the case and I can leave it alone until we or my parents have something we want to contribute.
humblecoder
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Re: Mechanics of funding a special needs trust account

Post by humblecoder »

I am not a lawyer, accountant, or other professional.

Similar to the OP, we created a Supplemental Needs Trust for our disabled daughter with my wife and I as co-trustees. About a year after the trust was created, we opened a self-directed brokerage account at Merrill Edge (since we do our banking at BoA and have most of our existing investment accounts with Merrill Edge).

Setting up the trust had to be done using paper forms, since there were certain items that had to be notarized. I had looked at some other brokers (Fidelity, Vanguard) and the paperwork requirements were similar from what I recall. This was definitely a different experience from creating a typical individual/joint brokerage account which can be done completely online. It actually took several weeks and several phone calls to finally get it opened up.

When we opened the account, we used my SSN for the account. Since our SNT is considered a Grantor Trust, no separate EIN was needed, as per the lawyer who help us create the trust. We also titled the trust account as per the instructions that our lawyer provided. Hopefully your lawyer gave you similar instructions

We put a small token amount into the trust account just to have something in there. We don't plan on putting any other money into it until it is funded through an inheritance or gift.

Others have mentioned an ABLE account. An ABLE account is also a good vehicle to put aside money for a special needs child. However, note that only the first $100K in an ABLE account is excluded from consideration for SSI so you want to keep an eye on the balance.

On the plus side, my understanding is that you are allowed to use ABLE money to pay for housing and food expenses without impacting benefits (EDIT: there is some nuances to this that you might want to research on the Social Security web site - I can explain in a followup if this is a point of interest), whereas a SNT cannot be used for these expenses; it can only be used for certain supplemental needs (hence the term Supplemental Needs Trust).

Finally, somebody mentioned a Medicaid "clawback" if there is money in the ABLE account when the beneficiary dies. However, my understanding is that this varies by state, so this may not be applicable to you.
musicmom
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Re: Mechanics of funding a special needs trust account

Post by musicmom »

Rent is one item that you can cover with ABLE funds, unlike SNT.

At 25, our daughter shared a home with two other special needs young adults.
There was live in support staff.
We were able to contribute to her ABLE account and then withdraw to pay her rent without it affecting her SSI benefits. IF I remember, the SS rule was that the withdrawal had to be in the same month as the rent paid.
Theres a bunch of info on the SS site.
Daughter subsequently obtained a state housing vouvher so we no longer use ABLE funds.
JBTX
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Re: Mechanics of funding a special needs trust account

Post by JBTX »

shorty313 wrote: Tue Jul 20, 2021 1:01 pm
musicmom wrote: Tue Jul 20, 2021 12:49 pm Can you explain the use of SNT for your child before your pasaing?
How would it differ from an ABLE account (if that applies)?
My son is 11. We currently aren't financially eligible for disability benefits so we don't need funds in there presently, but he may be eligible for disability benefits once he turns 18. My parents are also in the midst of updating their estate planning and are debating adding to his trust now vs when they pass, so I wanted to have the account open. I also assume (perhaps wrongly?) that it should be opened now (with the minimum bank amount) because (in my state at least) the language of the trust states it is open with a nominal amount. That's where I get confused.

I haven't looked too far into ABLE accounts yet.
I'm not a lawyer. We do have 17 year special needs son. Our estate plan is a revocable living trust, and within the RLT creates a special needs trust, if necessary, upon both wife and I passing. The same could be accomplished with trusts created in the will. We used an RLT for ease of designation for our parents who may pass on legacy.

We don't plan to create a SNT now. I talked to a guardianship lawyer and she didn't think it was necessary. I also had talked to a estate planning / elder law attorney and he didn't think it was necessary.

We have instructed our parents to the extent their legacy is passed on to us, do it directly to the RLT, not to minor children. I can think of no advantage to leaving directly to a child's trust, unless they wanted to bypass your spouse. (Again, I'm not a lawyer)

If no money is passed on to child from relatives, the need for an SNT while we are alive seems minimal. I recently opened a 529 able. To the extent necessary we will use it to fund disabled adult child's activities to avoid disqualifying from potential SSI, Medicaid, etc.

Some people, often lawyers who draw up SNTs will poo poo 529 Ables, because they have a modest limit, $100k, after which govt benefits can be curtailed, and also if disabled adult child dies, Medicaid could pursue reimbursement from ABLE account for prior services funded. We aren't too concerned with that because adult child is otherwise healthy, and we likely won't ever over fund it anyway.

An SNT could be useful if property is going to be owned by the beneficiary.
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shorty313
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Re: Mechanics of funding a special needs trust account

Post by shorty313 »

Thank you for all the helpful replies. I did get in touch with our attorney, and his explanation aligned with much of what humblecoder wrote. I don’t have to fund an account right now, the schedule a at the end is sufficient.

JBTX, that’s interesting, a SNT within a RLT. I’m not sure I quite understand it, but it seems like there are many roads to get there. The purpose of my parents directing some money directly to the SNT is they want to make sure a certain amount gets directed straight to my son before splitting the rest between me and my brother. Whether this is the best set up, I don’t know, but it’s what we have at this moment. I’m sure we will update things again when both our kids are adults and we see what his day to day function truly is. He may surprise us yet!

I certainly will be looking into ABLE when he’s a little closer to 18.
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galving
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Re: Mechanics of funding a special needs trust account

Post by galving »

shorty313 wrote: Tue Jul 20, 2021 2:37 pm
musicmom wrote: Tue Jul 20, 2021 1:51 pm SNT may operate differently according to state. Did an attorney create the trust? They would be able to help you.

We updated our wills when daughter turned 18 and added SNT.
In NJ, it was not required to fund it on creation. If we chose to there would be annual tax returns. Unnecessary in our case.
We provided financially for our daughter throughout childhood.
She received SSI at age 18, which was used for her benefit.

Consider an ABLE account. It is similar to a 529 though funds can be used for more than educational needs.
If your son qualifies for an ABLE, you and your parents can contribute funds (up to $15K per yr?).
The money in an ABLE account does not disqualify a person reciving governmental benefits such as SSI, SSDI, etc.
Im not an ABLE expert at all, so YMMV. But its been working for our family for about 5 years now.
We are in NJ as well. I may be misinterpreting the SNT language but thought it needed to be funded upon creation. I have a call in to the attorney who did our documents to clarify.

We had opened a 529 for him before ABLE account came into being so I never really looked it to it. Will do some further reading, but I thought there was an upper balance that could be reached that would disqualify some benefits.
We're in a similar situation.
Our SNT was created at the time of execution, with a $20 bill initially funding it.
Upon our death, our estate will roll into the SNT.

We've discontinued investing in 529, and will eventually shift the majority of dollars to an ABLE account.
I understood that there's a $100k limit on the ABLE account.
humblecoder
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Re: Mechanics of funding a special needs trust account

Post by humblecoder »

galving wrote: Wed Jul 21, 2021 8:08 am We're in a similar situation.
Our SNT was created at the time of execution, with a $20 bill initially funding it.
Upon our death, our estate will roll into the SNT.

We've discontinued investing in 529, and will eventually shift the majority of dollars to an ABLE account.
I understood that there's a $100k limit on the ABLE account.
I am not a lawyer, accountant, or other expert.

I want to highlight something that could be a potential pitfall to people, if they aren't careful. The sponsor of the account might allow you to have more money in the ABLE account, but if it is above that $100K limit, then you may lose your SSI benefits.

I am pointing this out because I was listening to a podcast on this topic, and the CPF who was presenting made a big deal of saying that state X's ABLE account allows you to have up to $250K in the account. He touted it like it was a good thing. However, he neglected to point out that any amount over the $100K limit could adversely affect the beneficiary's benefits. Somebody listening to that podcast might think "I'll just get an account with state X's plan and I can put more money into an ABLE account". However, that person might not realize that they could be putting their child's benefits in jeopardy by doing that.

Unfortunately, special needs financial planning is a niche topic that many lawyers, financial planners , etc don't deal with on a daily basis.
gtg970g
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Re: Mechanics of funding a special needs trust account

Post by gtg970g »

JBTX wrote: Tue Jul 20, 2021 10:54 pm
I'm not a lawyer. We do have 17 year special needs son. Our estate plan is a revocable living trust, and within the RLT creates a special needs trust, if necessary, upon both wife and I passing. The same could be accomplished with trusts created in the will. We used an RLT for ease of designation for our parents who may pass on legacy.

We don't plan to create a SNT now. I talked to a guardianship lawyer and she didn't think it was necessary. I also had talked to a estate planning / elder law attorney and he didn't think it was necessary.

We have instructed our parents to the extent their legacy is passed on to us, do it directly to the RLT, not to minor children. I can think of no advantage to leaving directly to a child's trust, unless they wanted to bypass your spouse. (Again, I'm not a lawyer)

If no money is passed on to child from relatives, the need for an SNT while we are alive seems minimal. I recently opened a 529 able. To the extent necessary we will use it to fund disabled adult child's activities to avoid disqualifying from potential SSI, Medicaid, etc.

Some people, often lawyers who draw up SNTs will poo poo 529 Ables, because they have a modest limit, $100k, after which govt benefits can be curtailed, and also if disabled adult child dies, Medicaid could pursue reimbursement from ABLE account for prior services funded. We aren't too concerned with that because adult child is otherwise healthy, and we likely won't ever over fund it anyway.

An SNT could be useful if property is going to be owned by the beneficiary.
One advantage of the grandparent funding the SNT is the IRA stretch is still available and also Roth accounts do not have to be exhausted in 10 years. Assuming there is enough money we would like a portion of our parent's retirement funds to go into our son's SNT.
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shorty313
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Re: Mechanics of funding a special needs trust account

Post by shorty313 »

One advantage of the grandparent funding the SNT is the IRA stretch is still available and also Roth accounts do not have to be exhausted in 10 years. Assuming there is enough money we would like a portion of our parent's retirement funds to go into our son's SNT.

I will have to look into this more. My dad originally thought to fund using a smallish IRA my mom has, but his financial advisor told him it's not the best move, I'm not entirely clear on the reasoning.
gtg970g
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Re: Mechanics of funding a special needs trust account

Post by gtg970g »

shorty313 wrote: Wed Jul 21, 2021 9:57 am
One advantage of the grandparent funding the SNT is the IRA stretch is still available and also Roth accounts do not have to be exhausted in 10 years. Assuming there is enough money we would like a portion of our parent's retirement funds to go into our son's SNT.

I will have to look into this more. My dad originally thought to fund using a smallish IRA my mom has, but his financial advisor told him it's not the best move, I'm not entirely clear on the reasoning.
It's definitely a situation specific decision. For instance if my mom were to die within the next 10-15 years we would definitely want to direct some of the IRA to the SNT since my wife and I will still be working and our marginal tax rate will be high and we'll be required to withdrawal all funds within 10 years. If she lives another 20 years we may direct the money to ourselves as we'll be retired and could live off of the inherited IRA distributions instead of our taxable account + Roth ladder. Also presumably there will be less money 20 years from now. It's a thought exercise you want to revisit every few years.
JBTX
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Re: Mechanics of funding a special needs trust account

Post by JBTX »

gtg970g wrote: Wed Jul 21, 2021 9:37 am
JBTX wrote: Tue Jul 20, 2021 10:54 pm
I'm not a lawyer. We do have 17 year special needs son. Our estate plan is a revocable living trust, and within the RLT creates a special needs trust, if necessary, upon both wife and I passing. The same could be accomplished with trusts created in the will. We used an RLT for ease of designation for our parents who may pass on legacy.

We don't plan to create a SNT now. I talked to a guardianship lawyer and she didn't think it was necessary. I also had talked to a estate planning / elder law attorney and he didn't think it was necessary.

We have instructed our parents to the extent their legacy is passed on to us, do it directly to the RLT, not to minor children. I can think of no advantage to leaving directly to a child's trust, unless they wanted to bypass your spouse. (Again, I'm not a lawyer)

If no money is passed on to child from relatives, the need for an SNT while we are alive seems minimal. I recently opened a 529 able. To the extent necessary we will use it to fund disabled adult child's activities to avoid disqualifying from potential SSI, Medicaid, etc.

Some people, often lawyers who draw up SNTs will poo poo 529 Ables, because they have a modest limit, $100k, after which govt benefits can be curtailed, and also if disabled adult child dies, Medicaid could pursue reimbursement from ABLE account for prior services funded. We aren't too concerned with that because adult child is otherwise healthy, and we likely won't ever over fund it anyway.

An SNT could be useful if property is going to be owned by the beneficiary.
One advantage of the grandparent funding the SNT is the IRA stretch is still available and also Roth accounts do not have to be exhausted in 10 years. Assuming there is enough money we would like a portion of our parent's retirement funds to go into our son's SNT.
Having the ira go to special needs child via SNT is an interesting idea, get stretch since disabled. However trust tax rates are higher than ordinary and I'd rather have ira going to me initially while I'm alive at lower tax rates, even if the stretch isn't as long. But an interesting thought.

I don't think you are correct on Roth accounts not being liquidated in 10 years. However for disabled child you can stretch it also.

Hopefully the trust will be set up as an accumulation trust. Having money spit out of the trust as recognized income could affect some benefits. Accumulation trust allows to keep amounts in trust with RMDS. If the accounts are Roth you avoid high trust tax rates as ira is depleted.
MtnBiker
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Re: Mechanics of funding a special needs trust account

Post by MtnBiker »

JBTX wrote: Wed Jul 21, 2021 5:52 pm

Having the ira go to special needs child via SNT is an interesting idea, get stretch since disabled. However trust tax rates are higher than ordinary and I'd rather have ira going to me initially while I'm alive at lower tax rates, even if the stretch isn't as long. But an interesting thought.

I don't think you are correct on Roth accounts not being liquidated in 10 years. However for disabled child you can stretch it also.

Hopefully the trust will be set up as an accumulation trust. Having money spit out of the trust as recognized income could affect some benefits. Accumulation trust allows to keep amounts in trust with RMDS. If the accounts are Roth you avoid high trust tax rates as ira is depleted.
Your concern about money spit out of the trust as recognized income (RMDs from stretched inherited IRA) affecting some benefits should go away after the special-needs child transitions from SSI to SSDI (whether on survivor benefit or when parent(s) retire and claim SS). At that point the disabled adult child would usually qualify for Childhood Disability Benefits (CDB) with SSDI income and dual Medicare/Medicaid coverage. There would still be an asset limit to qualify for Medicaid, but no income limit to qualify for any of these benefits.

CDB is explained here: https://www.specialneedsalliance.org/th ... ilities-2/
JBTX
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Re: Mechanics of funding a special needs trust account

Post by JBTX »

MtnBiker wrote: Wed Jul 21, 2021 6:36 pm
JBTX wrote: Wed Jul 21, 2021 5:52 pm

Having the ira go to special needs child via SNT is an interesting idea, get stretch since disabled. However trust tax rates are higher than ordinary and I'd rather have ira going to me initially while I'm alive at lower tax rates, even if the stretch isn't as long. But an interesting thought.

I don't think you are correct on Roth accounts not being liquidated in 10 years. However for disabled child you can stretch it also.

Hopefully the trust will be set up as an accumulation trust. Having money spit out of the trust as recognized income could affect some benefits. Accumulation trust allows to keep amounts in trust with RMDS. If the accounts are Roth you avoid high trust tax rates as ira is depleted.
Your concern about money spit out of the trust as recognized income (RMDs from stretched inherited IRA) affecting some benefits should go away after the special-needs child transitions from SSI to SSDI (whether on survivor benefit or when parent(s) retire and claim SS). At that point the disabled adult child would usually qualify for Childhood Disability Benefits (CDB) with SSDI income and dual Medicare/Medicaid coverage. There would still be an asset limit to qualify for Medicaid, but no income limit to qualify for any of these benefits.

CDB is explained here: https://www.specialneedsalliance.org/th ... ilities-2/
Yes, thanks. One of the decisions I'll have to make in the next 4-5 years is whether to take SS early to be able for son to draw adult child SSDI vs SSI. Typically I'd defer SS to 70, but having disabled adult child complicates the situation.
MtnBiker
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Re: Mechanics of funding a special needs trust account

Post by MtnBiker »

JBTX wrote: Wed Jul 21, 2021 7:04 pm Yes, thanks. One of the decisions I'll have to make in the next 4-5 years is whether to take SS early to be able for son to draw adult child SSDI vs SSI. Typically I'd defer SS to 70, but having disabled adult child complicates the situation.
The https://opensocialsecurity.com/ calculator does a great job of comparing those scenarios. In my case, it suggested I should file at age 62, but the difference between 62, 66, and 70 was only a few percent. I ended up splitting the difference, filing at full retirement age (66). The decision was based more on timing of Roth conversions and when the SS income was needed rather than optimizing the family's SS payout.
JBTX
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Re: Mechanics of funding a special needs trust account

Post by JBTX »

MtnBiker wrote: Wed Jul 21, 2021 7:32 pm
JBTX wrote: Wed Jul 21, 2021 7:04 pm Yes, thanks. One of the decisions I'll have to make in the next 4-5 years is whether to take SS early to be able for son to draw adult child SSDI vs SSI. Typically I'd defer SS to 70, but having disabled adult child complicates the situation.
The https://opensocialsecurity.com/ calculator does a great job of comparing those scenarios. In my case, it suggested I should file at age 62, but the difference between 62, 66, and 70 was only a few percent. I ended up splitting the difference, filing at full retirement age (66). The decision was based more on timing of Roth conversions and when the SS income was needed rather than optimizing the family's SS payout.
It is good and I've used it also. I think the recommendation for me was 62 also. I tend to customize to project longer life than statistical averages. Also one manual adjustment would be to add years of SSI before filing if you choose defer.

Seems like the "breakeven" age in our case was around 90 or 91.
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3CheersforLkyJack
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Re: Mechanics of funding a special needs trust account

Post by 3CheersforLkyJack »

We had an estate attorney handle this a year ago. DW and I have a revocable living trust. Once we pass, the RLT will split assets between our children, with our disabled son's portion going into his SNT. It was funded upon creation with a nominal amount ~$10. We won't be funding it further until much later in life due to the trust tax rates, unless our disabled son's SNT receives an inheritance. All family members have been informed that if applicable, their estate plans leave anything to him in the SNT and not his own name. We also save significant extra money in a taxable account and mega back door Roth that we consider untouchable for any purpose other than the future funding of the SNT. This money will fund the SNT later in our lives. Our plan is to put this money in the SNT years before we potentially end up in a nursing home which could drain our assets and leave minimal funds for the care of our disabled son after we pass. I would guess we will move those funds sometime around age 60-70 to the SNT, but maybe sooner.

Regarding an ABLE account, we have a regular 529 for him that we have been funding to the state deductible max since birth, which we continue to fund. It seems impossible that he would go to college. We have not moved those funds to an ABLE account yet due to the Medicaid claw back rules if the beneficiary passes. We will start rolling over those regular 529 funds to the ABLE as our son gets closer to age 18 (he is 5 now).

We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
humblecoder
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Re: Mechanics of funding a special needs trust account

Post by humblecoder »

JBTX wrote: Wed Jul 21, 2021 8:14 pm
MtnBiker wrote: Wed Jul 21, 2021 7:32 pm
JBTX wrote: Wed Jul 21, 2021 7:04 pm Yes, thanks. One of the decisions I'll have to make in the next 4-5 years is whether to take SS early to be able for son to draw adult child SSDI vs SSI. Typically I'd defer SS to 70, but having disabled adult child complicates the situation.
The https://opensocialsecurity.com/ calculator does a great job of comparing those scenarios. In my case, it suggested I should file at age 62, but the difference between 62, 66, and 70 was only a few percent. I ended up splitting the difference, filing at full retirement age (66). The decision was based more on timing of Roth conversions and when the SS income was needed rather than optimizing the family's SS payout.
It is good and I've used it also. I think the recommendation for me was 62 also. I tend to customize to project longer life than statistical averages. Also one manual adjustment would be to add years of SSI before filing if you choose defer.

Seems like the "breakeven" age in our case was around 90 or 91.
I agree that opensocialsecurity is fabulous in this regard. One thing to consider is that claiming SS and the corresponding child benefit will make your child eligible for Medicare after a waiting period. Based upon that, I might claim at age 62 even though this isn't the optimal choice as per the website. However, I still have many years to decide! :D
JBTX
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Re: Mechanics of funding a special needs trust account

Post by JBTX »

3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We had an estate attorney handle this a year ago. DW and I have a revocable living trust. Once we pass, the RLT will split assets between our children, with our disabled son's portion going into his SNT. It was funded upon creation with a nominal amount ~$10. We won't be funding it further until much later in life due to the trust tax rates, unless our disabled son's SNT receives an inheritance. All family members have been informed that if applicable, their estate plans leave anything to him in the SNT and not his own name. We also save significant extra money in a taxable account and mega back door Roth that we consider untouchable for any purpose other than the future funding of the SNT. This money will fund the SNT later in our lives. Our plan is to put this money in the SNT years before we potentially end up in a nursing home which could drain our assets and leave minimal funds for the care of our disabled son after we pass. I would guess we will move those funds sometime around age 60-70 to the SNT, but maybe sooner.

Regarding an ABLE account, we have a regular 529 for him that we have been funding to the state deductible max since birth, which we continue to fund. It seems impossible that he would go to college. We have not moved those funds to an ABLE account yet due to the Medicaid claw back rules if the beneficiary passes. We will start rolling over those regular 529 funds to the ABLE as our son gets closer to age 18 (he is 5 now).

We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
Keep in mind that you can only move $15k per year from 529 to able. I think.

Is your son already on Medicaid? If not I don't think there is anything to claw back.
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3CheersforLkyJack
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Re: Mechanics of funding a special needs trust account

Post by 3CheersforLkyJack »

JBTX wrote: Thu Jul 22, 2021 12:07 pm
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We had an estate attorney handle this a year ago. DW and I have a revocable living trust. Once we pass, the RLT will split assets between our children, with our disabled son's portion going into his SNT. It was funded upon creation with a nominal amount ~$10. We won't be funding it further until much later in life due to the trust tax rates, unless our disabled son's SNT receives an inheritance. All family members have been informed that if applicable, their estate plans leave anything to him in the SNT and not his own name. We also save significant extra money in a taxable account and mega back door Roth that we consider untouchable for any purpose other than the future funding of the SNT. This money will fund the SNT later in our lives. Our plan is to put this money in the SNT years before we potentially end up in a nursing home which could drain our assets and leave minimal funds for the care of our disabled son after we pass. I would guess we will move those funds sometime around age 60-70 to the SNT, but maybe sooner.

Regarding an ABLE account, we have a regular 529 for him that we have been funding to the state deductible max since birth, which we continue to fund. It seems impossible that he would go to college. We have not moved those funds to an ABLE account yet due to the Medicaid claw back rules if the beneficiary passes. We will start rolling over those regular 529 funds to the ABLE as our son gets closer to age 18 (he is 5 now).

We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
Keep in mind that you can only move $15k per year from 529 to able. I think.

Is your son already on Medicaid? If not I don't think there is anything to claw back.
He is already on Medicaid.
humblecoder
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Re: Mechanics of funding a special needs trust account

Post by humblecoder »

3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am Regarding an ABLE account, we have a regular 529 for him that we have been funding to the state deductible max since birth, which we continue to fund. It seems impossible that he would go to college. We have not moved those funds to an ABLE account yet due to the Medicaid claw back rules if the beneficiary passes. We will start rolling over those regular 529 funds to the ABLE as our son gets closer to age 18 (he is 5 now).
If your son isn't receiving Medicaid now, then I wouldn't think that there would be any thing to claw back. My understanding is that the claw back rule is that your state Medicaid can make a claim against the remaining proceeds in the ABLE account to pay back any Medicaid benefits paid from the time the ABLE account was opened. Also, this is at the discretion of the state Medicaid office, at least as I understand it. So it isn't necessarily automatic.

Additionally, as I mentioned up-thread, some states passed laws to prevent any claw backs. I happen to live in one of those states! 8-)
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
Absolute truth!
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Re: Mechanics of funding a special needs trust account

Post by 3CheersforLkyJack »

humblecoder wrote: Thu Jul 22, 2021 12:44 pm
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am Regarding an ABLE account, we have a regular 529 for him that we have been funding to the state deductible max since birth, which we continue to fund. It seems impossible that he would go to college. We have not moved those funds to an ABLE account yet due to the Medicaid claw back rules if the beneficiary passes. We will start rolling over those regular 529 funds to the ABLE as our son gets closer to age 18 (he is 5 now).
If your son isn't receiving Medicaid now, then I wouldn't think that there would be any thing to claw back. My understanding is that the claw back rule is that your state Medicaid can make a claim against the remaining proceeds in the ABLE account to pay back any Medicaid benefits paid from the time the ABLE account was opened. Also, this is at the discretion of the state Medicaid office, at least as I understand it. So it isn't necessarily automatic.

Additionally, as I mentioned up-thread, some states passed laws to prevent any claw backs. I happen to live in one of those states! 8-)
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
Absolute truth!
He is already on Medicaid so the claw back is applicable to us. I'll have to do more research if our state actively claws back or not. We will eventually roll the regular 529 to the ABLE, we just haven't started yet. We don't plan to use those funds until much later in his life so there really isn't a difference between the regular 529 and ABLE if we aren't currently taking withdrawals.
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shorty313
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Re: Mechanics of funding a special needs trust account

Post by shorty313 »

humblecoder wrote: Thu Jul 22, 2021 12:44 pm
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am Regarding an ABLE account, we have a regular 529 for him that we have been funding to the state deductible max since birth, which we continue to fund. It seems impossible that he would go to college. We have not moved those funds to an ABLE account yet due to the Medicaid claw back rules if the beneficiary passes. We will start rolling over those regular 529 funds to the ABLE as our son gets closer to age 18 (he is 5 now).
If your son isn't receiving Medicaid now, then I wouldn't think that there would be any thing to claw back. My understanding is that the claw back rule is that your state Medicaid can make a claim against the remaining proceeds in the ABLE account to pay back any Medicaid benefits paid from the time the ABLE account was opened. Also, this is at the discretion of the state Medicaid office, at least as I understand it. So it isn't necessarily automatic.

Additionally, as I mentioned up-thread, some states passed laws to prevent any claw backs. I happen to live in one of those states! 8-)
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
Absolute truth!
Another difficulty in the planning, at least for us, is that predicting my sons abilities 5, 10, 15 years from now is a crapshoot (ASD). Five years ago I would have said he’d live with us forever. Now as he matures I have hopes he can live on his own, but unsure of his ability to make it through college or hold down a job that can support him. Five years from now we may be completely confident in those things…or still not. So we are planning as best we can for now.

As an elementary question…do I have to have him declared disabled by SSDI BEFORE he turns 18? Or at that time? For now we can provide all his needs. And is there guidance on determining disability for SSDI?
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Re: Mechanics of funding a special needs trust account

Post by humblecoder »

shorty313 wrote: Thu Jul 22, 2021 1:39 pm As an elementary question…do I have to have him declared disabled by SSDI BEFORE he turns 18? Or at that time? For now we can provide all his needs. And is there guidance on determining disability for SSDI?
We have not gone through the process yet with my daughter since she isn't eligible for any benefits yet.

My understanding is that when you apply for SSI or SSDI, the Social Security administration will determine if she meets the disability criteria. According to the SSA website, their disability criteria is listed here: https://www.ssa.gov/benefits/disability ... ml#anchor3. In my daughter's case, she has been diagnosed with one of the conditions that is listed in the list of "compassionate allowances", meaning that a confirmed diagnosis will qualify you.

Another note in case you didn't realize this... You mentioned SSDI. SSDI is available only if one of the parents has claimed their own Social Security benefit. So your child may not be eligible for SSDI regardless. However, your child MAY still be eligible for SSI, which is based upon your child's income/assets as well as the disability criteria. My apologies if this is "old news" for you.
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Re: Mechanics of funding a special needs trust account

Post by JBTX »

3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
I feel your pain. If we had a normal situation we could safely retire now. But exactly how do you factor in the lifelong needs of a special needs child? You are potentially looking at 7 figures. That would generate $30k per year, plus SS disability so maybe $40-$50k. That may be enough, but you can easily spend more than that. In addition we have a spendthrift bipolar child who I have no idea what the needs will be there, or even if future needs should be funded (money= potential irresponsible behavior)

Future inheritance from our parents could be a factor but that is something that is hard to plan for and typically don't want to rely on.
JBTX
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Re: Mechanics of funding a special needs trust account

Post by JBTX »

shorty313 wrote: Thu Jul 22, 2021 1:39 pm
humblecoder wrote: Thu Jul 22, 2021 12:44 pm
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am Regarding an ABLE account, we have a regular 529 for him that we have been funding to the state deductible max since birth, which we continue to fund. It seems impossible that he would go to college. We have not moved those funds to an ABLE account yet due to the Medicaid claw back rules if the beneficiary passes. We will start rolling over those regular 529 funds to the ABLE as our son gets closer to age 18 (he is 5 now).
If your son isn't receiving Medicaid now, then I wouldn't think that there would be any thing to claw back. My understanding is that the claw back rule is that your state Medicaid can make a claim against the remaining proceeds in the ABLE account to pay back any Medicaid benefits paid from the time the ABLE account was opened. Also, this is at the discretion of the state Medicaid office, at least as I understand it. So it isn't necessarily automatic.

Additionally, as I mentioned up-thread, some states passed laws to prevent any claw backs. I happen to live in one of those states! 8-)
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
Absolute truth!
Another difficulty in the planning, at least for us, is that predicting my sons abilities 5, 10, 15 years from now is a crapshoot (ASD). Five years ago I would have said he’d live with us forever. Now as he matures I have hopes he can live on his own, but unsure of his ability to make it through college or hold down a job that can support him. Five years from now we may be completely confident in those things…or still not. So we are planning as best we can for now.

As an elementary question…do I have to have him declared disabled by SSDI BEFORE he turns 18? Or at that time? For now we can provide all his needs. And is there guidance on determining disability for SSDI?
The criteria for adult child disability through Social Security is being disabled before the age of 22. I'm not sure, but I think technically you could apply after 22 as long as you can demonstrate the condition was before 22. However, if you can qualify for SSI before 22, it probably makes the adult child SSDI application a lot easier.
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Re: Mechanics of funding a special needs trust account

Post by 3CheersforLkyJack »

JBTX wrote: Thu Jul 22, 2021 2:25 pm
3CheersforLkyJack wrote: Thu Jul 22, 2021 8:40 am We have a decent income but nothing even remotely close to doctor/tech/lawyer levels seen on this board. The amounts we are saving that we consider untouchable for our disabled son are significant to our income, but we are happy to sacrifice now so he can live his best life when we are gone. We're saving for two retirements, one which will last a lifetime. If you think financial planning is complicated for normal families, it is nothing compared to families with special needs children. It is something that I think of almost daily.
I feel your pain. If we had a normal situation we could safely retire now. But exactly how do you factor in the lifelong needs of a special needs child? You are potentially looking at 7 figures. That would generate $30k per year, plus SS disability so maybe $40-$50k. That may be enough, but you can easily spend more than that. In addition we have a spendthrift bipolar child who I have no idea what the needs will be there, or even if future needs should be funded (money= potential irresponsible behavior)

Future inheritance from our parents could be a factor but that is something that is hard to plan for and typically don't want to rely on.
This is Bogleheads where having a $1M+ retirement portfolio seems common. Most people can't imagine having $1M for retirement, and we need to plan on our retirement plus maybe $1M more for our disabled son. We are natural savers and extremely fortunate that we were saving a large portion of our income before this diagnosis. We'll be fine. We would have been able to retire pretty early. Maybe we still will, but working a few extra years to pad the nest egg for this is something I'll gladly do.

We'd like to leave some money to our other child as well, but if it turns out he gets less because his brother can't provide for himself, he will need to accept that. I highly doubt it will come down to that, but if it does it will be an easy decision on who needs that money more.
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