In this episode, we discuss financial planning for children with special needs. Our guest, Zaccary Call, explained that there are many different facets to Social Security. Social security/retirement income is what we think of retirement benefits and starts at age 62 (or later if you choose). Supplemental security income (SSI) and Social Security Disability (SSDI) both have disability requirements when it comes to children.
SSI is a benefit paid based on need, whereas SSDI is based on the child’s earnings (if they have worked for at least 10 years) or their parent’s earnings. To qualify for and keep SSI, you cannot have more than $2000 in assets, excluding your home and your car. Under SSI, you can earn only $19,000 a year, although they don’t count all of the income, as they have some allowable deductions, such as for sustaining life (like housing and food). SSI is funded by general tax revenues. The Federal Benefit Rate (FBR) is $771 for one individual and $1157 for a qualified couple, as of 2019. SSDI is based on someone who is insured, meaning they have been in the workforce for at least 10 years (or 10 years worth of quarters) to qualify for SSI benefits. There is a family maximum of 150-200% of the parent’s SSI.
SSDI is not paid due to low income, but it is paid because the child has worked or their parents have worked. Of note, SSDI is often denied the first time, but you are allowed to appeal or reapply. Most children who qualify for SSDI are adults when they become eligible for SSDI. Another, and unfortunate, way to qualify is if a parent passes away, as you can use the SSI death benefit. To qualify for a disability under SSDI, you need to show the child can’t do any typical job. They look at current work status of the child, how much money the child and parents are earning, how severe the medical condition of the child is (lasting at least 12 months or expecting to result in death), can the child do the job he/she was doing, and can the child do any job at all. However, if the child is blind, they automatically qualify for SSDI. A state disability agency makes the determination of disability. If this information is confusing, there is a child disability starter kit which can help you figure out where to start.
Social security planning can be very important, as there are a lot of benefits within social security and there is a lot to navigate. There can be a lot of swapping with SSI, so it can be helpful to meet with a financial planner to discuss eventualities and the best option for your SSI. Do not contact SSA for help, as they tend not to give accurate answers. Attorneys can help with this process, but they tend to cost money. Financial planners can be very helpful, however, and less expensive.
Retirement and income planning can be very complex when you have a child who has special needs and is likely to outlive you. Special needs attorneys can help. Special needs trusts may also be helpful. A trust is a document that lays out a set of instructions that are to be carried out. A person with a disability can receive money from with without it hurting their ability to obtain SSI. These are irrevocable gifts from a legal perspective and this should be the amount you feel that family member needs. You can set up a secial needs trust for anyone who is disabled, and rules are not as strict as an ABLE account or SSI/SSDI. The purpose of this is to make sure you can provide additional money to the child without jeopardizing their SSI. To create a special needs trust, you would need to work with an attorney to help you draft the documents. This typically costs $1500-2500. Make sure that attorney is very familiar with special needs trusts.
An ABLE account is easier to set up and less expensive to set up. It is a tax-advantaged account. It is similar to a 529 plan, but for the needs of children with special needs. A family can put money into this account and have the money invested and take it out and spend it on things that the disabled person needs, such as food, medical expenses, and living expenses. For these accounts, you take the money out and use whenever you need it. It can also help avoid losing SSI, while also providing additional money to the child. Max contribution is $15,000 per year. The max lifetime contribution is around $300,000. The first $100,000 (at a time) is exempt from impacting eligibility for SSI. If there is money left after the person passes away, Medicaid can recoup some money, but the rest will go to a beneficiary that was previously designated. To be eligible for ABLE accounts, you must meet criteria for a disability, with similar criteria as SSDI. To set up an ABLE account, find the state that you would like to set up your ABLE account with and follow their instructions.
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SSA disability page
Brochure about Disability
How do you qualify?
Child disability starter kit.
Special Needs Trust
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Hosted by: Jessica Temple and Lewis Temple
Disclaimer: Our show is not designed to provide listeners with specific or personal legal, medical, or professional services or advice. Parents of children with health issues should always consult their health care provider for medical advice, medication, or treatment.
Copyright 2020 Jessica and Lewis Temple