Transcript
Speaker: Everyone dreams of living an uncommon life and the best asset you have to achieve your dreams is you. Welcome to the Uncommon Wealth Podcast.
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Speaker: Hello and welcome everybody to another episode of the Uncommon Wealth Podcast. I'm your host Philip Ramsey and we have the one and only Cody Kowalski. Gotta love it. Gonna give a quick shout out to one of our listeners, Greg. Greg, thanks Greg. Yeah, sent me a text that said, hey, you should do a podcast on special needs trusts. Yeah. And for people who have maybe a disabled child and what you should do and why they're important. And I was like, that's a great feedback and good shout out. So we thought we would do it. And Also want you to know that if you ever do reach out and give us a topic, we'll try to get something on there. Yeah. So so thanks for reaching out. It means a lot. Absolutely. So we're going to kind of go into this. And the first thing I'll say is that these are very complex. For sure. And so there are designations out there for this specific thing to help families navigate this. Yeah.
Speaker: and lawyers that help you to do that. And so we are no experts. Totally. But we are going to give you some kind of high level and then going kind of walk through this just for those people who have maybe a special needs child or maybe have maybe this could be a cool planning opportunity. And hopefully this gives enough perspective to realize, oh, there's some opportunities here I might be missing out on to then go reach out to someone. And this might be the podcast. You don't have that or you send it to somebody who might have it or might have an opportunity here. For sure. The other thing I'll say
Speaker: specifically when you go to send this out and try to get your child qualified a lot of times it'll be denied the first time yeah even when there's a professional doing it so you have to be kind of tenacious in this you have to kind of work through this but the byproduct of it is very powerful and super helpful so we're to talk about two accounts today we're going to talk about a special needs trust we're gonna talk about able accounts yeah and then we might even get into some legislation on what's changed in the past couple years that I think is important to know. So Cody, let's have you start it off and then I'll pipe in when I need to, but if you're like rocking, I don't know if I'll talk a lot. All right, we'll see. But I mean, the name of the game is governmental benefits. Like that's the whole point of this, right? That's absolutely right. To maximize the benefit that your special need child can get. And by strategically putting these, you know, trusts, these accounts in place, it allows you to get potentially a lot of governmental benefits. And that's what we're trying to help explain to you guys some of the ways to do that.
Speaker: Yeah, and so the first thing I think without, I want you to jump in here, but just qualifying your child for a benefit. Like that's first and foremost, like you have to jump through the hoops to do that. Because if you don't do that, there's really no income coming in for that child. And so I'm sure the people with special needs that are like, yeah, totally. Like that's an obvious one, but But for those people who don't, maybe, and you're still listening, thanks for continuing to listen. But yeah that's important. Totally. And I think the two ones that we're really going to hype on today or jump into today is the SSI benefit and then Medicaid. And we'll talk about this more, but the SSI benefit is a gateway to get to Medicaid. But let's just start with a quick comparison great between the two. So you have special needs trust. Yep, special needs trust and ABLE accounts. Yeah, exactly. And, you know, the first one is special needs trust, therefore large sums of money, right? Yep.
Speaker: Yeah, so that for large sums of money, you got to think, you know, if you have a child in this situation and you want to give, say, $200,000 into an account for them to be able to pull on for things like education,
Speaker: ah travel that's where you're gonna want a special needs trust. And so it's for those big pots of money. And then ABLE accounts, much smaller, right? Much smaller. Yeah, absolutely. And, you know, when you think about the ABLE account, it's more of like a checking account. It's for everyday expenses. It's for food, it's for gas. and You honestly, you know, you can get a debit card attached to these things. And so those are the two biggest differences between the two. But there's specific planning opportunities when you link them together. So if I was going to just dumb that down and kind of like simplify that. Yeah. I think ABLE accounts are maybe for those those children that are under 18.
Speaker: That's kind of my thought just quickly. And then those those special needs trusts might be for children over 18. And the only reason why I say that is because maybe the parents don't have as much money to do a special needs trust when your child's under 18. Like you're just trying to make ends meet. Can I get an amen? But then when you're older and you're starting to build wealth, then you're starting to think of like, oh, maybe a special needs trust is important. Yeah. And that special needs trust, like you're saying, it specifically plays a role when that child is 18 or older and the parent has the money to be able to fund it. That's An ABLE account works really well.
Speaker: at all times, but even especially those ages, zero to 18. Yeah, and I like that you said it's like a check-in account yeah kind of thing. Yeah, for sure. And so when you think one other kind of really comparison between the two is with just the contributions. You know, how much can you contribute to these accounts? With a special needs trust, there is no contribution limit and there's no asset limit. Yeah, it's a big deal. know, you're able to fund and for wealthy folks, like you're able to just, you know, put more money in there and and that's,
Speaker: advantageous. Now, you know, the ABLE account, there's that cap of around $100,000 for your assets. And so you got to think ABLE accounts, I mean, for many of us, most of us, yeah that would that would work great. So maybe we don't even to worry about the special needs trust, right? You know what i mean? Yeah, probably true.
Speaker: Probably true. But with that $100,000 asset limit, that's why the special needs trust plays a particular role for when you're have having more money than $100,000. And then also with the ABLE account, the contribution limit for those is up to the gifting exclusion.
Speaker: The other thing too that I wanted to kind of point out to is up till recently, that was only like, we're talking about maybe your son or daughter having a disability, but that might happen like if your son or daughter gets a disabled later on in life. yeah And so up to recently, that was only the age 26.
Speaker: And now it's up to age 46. So you can disabled up to 46 years of age and still rely on and yeah push on on these ABLE accounts and these special needs trusts. yeah But that was just because of the legislation that just got passed. their Secure Act 2.0. That's right. yeah So I think that's interesting to kind of think through because there might be some people who just didn't know that. yeah Maybe. For sure.
Speaker: that's what we're here for. It's good. right. So now we talked a little bit about the comparison. Let's move towards what does it look like to actually qualify? And so, Philip, talk a little bit about, you know, the before 18 to the after 18, that kind of switch. Yeah, yeah. So the hard limit before your child turns 18 is $2,000. Yeah. So that's that's pretty, that's monthly, right? Yeah, monthly.
Speaker: So that's pretty low, but also thinking about, you know, income and that point, like that could be perfect for him. Yeah. Now, when they cross over 18, then it's their specific individual income. yeah But before 18, it's not just their income, it's the parents' income that they're pulling from. So that really disqualifies a lot of high net worth or high yeah net worth clients to even do the ABLE account. yeah So you have to immediately go to the special needs trust. And so that's the only thing, like income, $2,000 or more, like you really do start disqualifying yourself yeah pretty much. And so if you're before 18, you're really focused on the disabilities person, like, you're I'm sorry, before 18, you're focused on your parents' income, after 18, switches to the disabled person. Yes, exactly. perfect And so what are those qualifying numbers? There's two different qualifying numbers to keep track of. There's the assets and there's the income yeah for the assets. You have to have less than $2,000 of assets to qualify to get governmental benefits, specifically the SSI governmental benefit. um
Speaker: and you have to have less than $1,975 of monthly income in order to qualify for the governmental SSI benefit. so So those are low. Yeah, that discounts a lot of people. You know what and I mean? and so Honestly, and I'm not joking, like 95% of our clients is like, can't do that. Exactly. And so that's why, the really big planning opportunity happens when that child turns 18 and it flips because now it's dependent upon the child, the disabled child's income, the disabled child's assets. And that's when these two tools are extremely helpful. That's good. And so ah just some other things with qualifying, like he said before, you oftentimes you get denied.
Speaker: you get denied once and then you got to try it again that's right and so having specialists with like lawyers yeah get denied totally they've done it so many times like oh yeah that just happened it just felt like if you were doing it you might be discouraged and stop doing it totally um and then also there's a really unique perspective change of oh this what can my child do versus can't do talk about that a little bit Yeah. So when you're filling this stuff out, you have to talk about what your child can't do. Yeah. Instead of what your child can do, which is a really paradigm shift because like whenever I think about my kid, I just think about all the things he can do. You're the you're the biggest cheerleader. I'm your biggest cheerleader. Like go go get them. And now it's like...
Speaker: Actually, you can do nothing according to the government. You just have to think about the things that they can't do. And that really helps them qualify them pretty quickly of like, oh they can't do this. They can't do that. And again, like these thresholds are to be talking with a specialist because you can't lie. You know what I have to be honest. Absolutely. And so you need to talk with a specialist to understand what are my grounds for what I can say is, you know, or versus not. And so that's one of those kind of qualifying things to think about. And now let's jump into, okay, what are the benefits? Like why we've talked about a little bit about the benefits of talking about qualifying, but what are the actual benefits that I'm going to get once I qualify? And the two big ones is SSI. And what that is, it's it's a governmental monthly benefit that supports the child and it's up to a max of $994 month. And so that's helpful, but I would say that the the biggest benefit is the Medicaid. It's the jackpot. It's the SSI is the gateway, the doorway. Well, I don't know about the jackpot. Like, special needs, like, there is...
Speaker: some real financial strain that happens on the family. And so, $900 a month is, oh, that's nice. But that's really probably not going to do if you think about all the different things that you might have to purchase for just caring for your child. And so that's where the Medicaid is really powerful just to help supplement that SSI. And you can do those in complement too, right? Yeah, You can get both. You can get both. Exactly. so but and And some of the research we've been doing is they're talking about these Medicaid benefits. And the reason they're saying they're so special is because if you just go try to purchase them on the private marketplace, they're not available. The yeah only way to get there is through having low assets and low income to qualify. And so some of those Medicaid benefits that are really helpful, adult housing, group homes, vocational programs, college tuition, these are all things that Medicaid is really helpful for. And so that's a little bit of of kind of why you want to go get there. And now let's kind of jump to what is a planning opportunity here that we've read about that we think is helpful? Yeah, for sure. I'll speak to one and then you can take it over.
Speaker: But I think one of the biggest things is because that secures Act 2.0 is when the parents or the whoever's going to gift this the special needs trust, they do a Roth conversion. yeah And so once you do the Roth conversion, so typically once that's gifted to the beneficiaries, you have 10 years to then push that out. yeah It's like a 10 year window, yeah beneficiary kind of window. Well, with the Secures pack Act 2.0,
Speaker: That's doesn't, it's not the case in ah in a and a special needs trust. So when you think about all the savings that yeah that can be over the course of the lifetime of that individual, I mean, you're talking about hundreds of thousands of dollars. Yeah. Saved. Yeah. That's a lot. Yeah. So that's just something to be thinking about is just doing some more Roth conversions. If you do have a special needs yeah person in your life, because those will go longer for them. Yeah.
Speaker: For sure. Okay, and then the other planning opportunity to start, it's worth to to preface, you need to understand that when you're taking withdrawals from a special needs trust and you're using those funds for the child's housing, that lowers your SSI benefit.
Speaker: And so this planning opportunity is essentially saying, okay, if I have a child who has an SSI monthly benefit, say they're getting the $9.94 month. What you do instead of paying their rent through the special needs trust, you create an able an ABLE account. And what you do is you transfer the money from the special needs trust to the ABLE account and you pay for the housing through the ABLE account. Then that governmental benefit of the 994 month stays exactly the same. It doesn't reduce. That's the second planning. account That's good.
Speaker: So there's there are some quirky things that we have to kind of work through. Yeah. And again, every case is very specific and individualized. And so, yeah, but I do think this is important. And so, like, Greg, shout out to you, man, for even wanting us to talk through it, because yeah we even had to do some some research on even to do the podcast to wrap our head around it and to get in it. That's right. or It's a totally different world. That's so true.
Speaker: But. And when you have a special needs child, it can, it's approachable. It's approachable. There are some quirky things that might be, you don't think about maybe from a planning perspective. Totally. But I'm thinking of a good friend, Jim, like he has a special needs daughter. She's amazing. Yeah. and And he can talk this language like he should be on the podcast because he, he's kind of gone through this and he's figured this out. And so you can do it.
Speaker: You probably have to have advocates just to get your head wrapped around there. But yeah, At the end of the day, like it's important to try to maximize these things yeah for your benefit and your and your special needs benefit. so And i mean, the governmental benefits, are they're advantageous. And so we've seen here, you need strategic planning in almost 95% of the cases to get it. yeah And so it's worth talking to a specialist if this is you to be able to see, is there an option here? Is there a possibility to get in? And then I think a lot of people have the stigma of like, I don't want to use Medicaid. But like this is a benefit that you've paid into. Exactly. So this is a benefit that is for this circumstance. Yeah. You're not trying to game the system.
Speaker: You're using it to be able to care for an individual yeah that you know you love. You know, love and care for. So it's important that you you maximize these things, not to try to be shady, but because you've paid into it. yeah And this is what it's for. So that's what I got. That's good. Thanks. Yeah. So you've been listening to Uncommon Wealth Podcast. If you have any questions about this or anything else, maybe some podcasts we can do in the future, please reach out to us. We'd be happy to get that feedback. Until next time, go be uncommon.
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