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Cindy Haddad: Financial Planning for People With Disabilities

Cindy Haddad: Financial Planning for People With Disabilities

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Our guest on the podcast today is Cynthia Haddad, an expert on financial planning for people with disabilities and their families. Cindy co-founded Affinia Financial Group, which was just acquired by Sequoia Financial Group. Cindy is now senior vice president and wealth advisor for Sequoia’s special needs planning practice. She is also co-author of The Special Needs Planning Guide, now in its second edition. Cindy is a certified financial planner and a chartered special needs consultant. She received her bachelor’s degree in economics and finance from Simmons University.



John Nadworny

The Special Needs Planning Guide: How to Prepare for Every Stage of Your Child’s Life, by Cynthia Haddad and John Nadwordy

Basic Special Needs Planning

A Parent’s Guide to the Special Needs Letter of Intent,”

Choosing a Guardian for an Adult With Special Needs,”

The Academy of Special Needs Planners

Special Needs Alliance

NALA—The Paralegal Association

Government-Provided Assistance and Special Needs Trusts

The ABLE Account

Government Benefits

Housing and Transition

The Arc of Massachusetts

A Special Needs Trust and Your Plan for the Future,”

How ‘Third-Party’ Special Needs Trusts Differ From Other Trusts,”, March 8, 2023.


(Please stay tuned for important disclosure information at the conclusion of this episode.)

Christine Benz: Hi and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.

Jeff Ptak: And I’m Jeff Ptak, chief ratings officer for Morningstar Research Services.

Benz: Our guest on the podcast today is Cynthia Haddad, an expert on financial planning for people with disabilities and their families. Cindy co-founded Affinia Financial Group, which was just acquired by Sequoia Financial Group. Cindy is now senior vice president and wealth advisor for Sequoia’s special needs planning practice. She is also co-author of The Special Needs Planning Guide, now in its second edition. Cindy is a certified financial planner and a chartered special needs consultant. She received her bachelor’s degree in economics and finance from Simmons University.

Cindy welcome to The Long View.

Cindy Haddad: Christine, it’s a pleasure to be here. Thank you for having me.

Benz: Well, we’re so happy to have you here. We’ve wanted to cover this topic for some time. You have a personal interest and a personal connection to people with special needs, as do I. Can you discuss your background there and your interest in special needs planning?

Haddad: I’ll be happy to. I have a brother in his 60s with developmental disabilities. And many, many years ago, my mom and I attended a workshop about housing for people with disabilities. And I always knew that at some point I would be caring for Ron for the rest of my life and for the rest of his life. And as you know, brothers and sisters, we share the longest relationship on earth. And I knew that there was a lot that I didn’t know. And when I tried to find out what I would do if something or when something happened to my parents, how would I step into their shoes? And how would I be that great advocate, that great caregiver, but also be Ron’s sister? I knew there weren’t many, many answers. So, I spoke with an awful lot of financial firms at the time, back 30 years ago. And I was told by many that they didn’t know anybody that had a family member with a disability. Or they said, the state takes care of those people. They live in institutions. And I thought there were all these things that people were unaware of. And I knew there were a lot of me’s out there.

And then I went into one firm and the principal there said, “I don’t know anybody that has anybody with a special needs. I don’t have clients with special needs. But there is this one guy in the office, he’s an advisor, and his son was born with Down syndrome, and he’s been having some seizures.” And that’s when I met John Nadworny. And together as a parent and a sibling team, we have really journeyed this path in special needs planning and have tried to pave the way for other families. So, understanding all the complexities of government benefits, the emotional side of planning, the family and support side, the government benefits, the legal benefits, legal implications, as well as the financial implications. That’s been our journey. That’s been our team effort. And really, I’m still here for Ron. My parents have since passed, recently passed, and they were at least able to see him living independently and see him living a good life. And he purchased a condo thanks to a little bit of help from a good financial advisor that he had in the family. And he’s working. He’s gainfully employed, and he has a wonderful support network, and my brothers and I continue to support him.

So, my quest was to find out what I didn’t know. And John and I together created information, resources, and materials for other families and other advisors to help us in this mission to reach out and share with other families all that we’ve learned personally and professionally over the years. And here we are today.

Ptak: In the introduction in your book, you note that the population of people with special needs has increased dramatically over the past few decades. Why is that?

Haddad: Oh, there’s a lot. If you read from the CDC, there’s one in four adults in the U.S. are living with a disability. One in 36 children in the U.S. are diagnosed with autism spectrum disorder before they’re age eight. A lot, I feel, we feel that we found is there’s more awareness, there’s more acceptance, there’s more ways to identify if there’s a disability. And many years ago, people were just who they were. Now we can define what’s going on. There are other organic reasons from the medical community, but what we’re seeing is that people with disabilities are living longer, so there needs to be a little bit longer planning. And there’s the four types of disabilities, according to the CDC: the physical, the developmental, the behavioral and emotional, and the sensory impaired. And now we see that more and more awareness is around those sensory impaired, which is developmental disabilities or autism, mental health. That’s huge, that’s happening throughout. It’s a national epidemic. There’s also acquired brain injuries, more accidents. There’s more sensory processing, MS, multiple sclerosis. There’s just more awareness out there as well to be able to identify somebody that needs help. And there’s definitions, even anxiety, that we would always just live with and plow through and try and get through as best we can. Now it’s an identifiable disability in many cases.

Benz: It seems like awareness would clearly be a good thing, better diagnoses, clearly a good thing. In your years of working with families who have loved ones with special needs, what are some of the key other changes that you’ve observed over this period? And maybe you could start with the ways that things have changed for the better.

Haddad: I always like to be on the more positive side. But what has changed on the positive side, really, for people with disabilities, there’s more opportunities for them to live and work in the community, to have relationships. There are more advocacy efforts from professionals, agencies. Even think about during COVID, a lot of the grocery stores needed greeters. They needed people to wipe down those carriages. Well, they were opportunities for employment that were created out of a bad situation, such as COVID. But people are thinking they’re dependable employees. So now large corporations are hiring. They’re having programs, which my brother was part of one of those training programs, to work at a major corporation. So, I think, because of the acceptance, there’s more tolerance, there’s more understanding, and there’s more patience, as well as awareness and empathy. And opportunities to live in the community. My brother lives in a beautiful home, big old home. And he owns a condominium unit as part of that home and lives with nine other folks with varying disabilities. And they have staff in place, and it’s a wonderful environment. So, there’s different types of supports that can provide help for different types of needs and abilities.

John Nadworny, my partner, his son, he built a home for him to be able to live. The problem that they’re having now is finding the staffing to come in. And so, the negatives. There are not enough people to support individuals with disabilities. There are not enough direct support professionals. Nobody wants to work. Same thing with caregivers for our elders. It’s the caregivers for our folks with disabilities, job coaches, people to come one-on-one to help individuals. And different agencies and day programs and residential programs are having a hard time finding staffing. And so that’s one of the biggest challenges that families are facing today.

Ptak: This is a sensitive question, but I can imagine that some parents might struggle to accept that their child has a disability and might be disinclined to create a plan for that child in a timely fashion. How common is that, for lack of a better term, denial about the disability?

Haddad: Oh, that’s very, very common. It’s very emotional. And when we created our book, we created five factors of special needs financial planning. And one of those factors is the emotional factor. So, there’s a whole bunch of emotions of acceptance, denial, uncertainty, fear of making the wrong decision or fear of parents dying before their children and who will be there when they’re not able to be there. So, a lot of emotions come into play. And it’s difficult to make decisions that parents don’t know how long down the road they’ll be able to sustain whatever plan they’re setting up today. So, we talk about, planning for the worst and hope for the best. But we try and avoid crisis planning. And as you know, families and people do not plan to fail. They just fail to plan. So those emotions can play a big part. But that’s our job as financial advisors to take the emotions out of the equation and help families to make good financial legal decisions.

Benz: It seems like another thing that families would sometimes struggle with would be being realistic about the amount of care they’ll personally provide for their loved ones. I’ve encountered a lot of families where, the plan is, well, mom and dad will just continue to care for the child for as long as possible. And there’s not really a plan after that. So how do you help families be realistic about what they’ll personally be able to do for the child?

Haddad: Yes, that’s a tricky one. Here, nobody wants to pass judgment. But we’ve worked with so many families over the years. And personally, we know what it’s like. And we’ve been in their shoes. And I will share my own family situation. Ron was always supposed to live with me and be with me, and I would be there for him. And my parents didn’t have a plan in place, but it was just expected. And then I started dating someone that they didn’t think I would survive or if I married him, I’d be divorced. But they were concerned about Ron. And that was a wake-up call for them to think about the planning. And many families don’t want to think about that. And of course, many times we hear from parents that their wish is that their child dies a minute before they do. So that they don’t have to worry about who will be there for them. But by not planning, we’re setting up their child to fail. We’re not allowing them to build a team. And we’ve always talked about building a team to carry on.

Alex Nadworny, my partner, has always talked about building a team to carry on. Because when she started working with us, John’s daughter, her thought was, what am I supposed to do? And my thought was always, what am I supposed to do? But we need to think about that and talk about the reality that someday parents may physically not be able to care for their child in the way that they’ve been accustomed to. And the worst thing that could happen is the parent dies or the parent becomes disabled and needs to go to an assisted living or nursing home. And then who else is there to pick up the pieces for both? So, it just makes it even more complex if there are other brothers and sisters. You’re leaving a double burden to them to figure out how to care for mom and dad, how to care for their sibling, and also how to live their own life. Which was me for many years. I was a supersize sandwich generation caring for my elderly parents, my young children, and my brother. So up, down, and across.

And many times, you feel like a panini, squished between them all and not knowing how to take care of. But having these conversations and allowing families to speak openly about what’s their vision for their son or daughter, and who else would be in that child’s life? How about talking about a team, a team of professionals, family members, friends, agencies, and just a whole network of supports. So instead of waiting to the last minute when we’re doing crisis planning, let’s plan for the worst, hope for the best, have some flexibility in those plans, and let’s try and be realistic. And I think one of the biggest gifts that my parents gave to me and my brothers was to see Ron thrive in his own home with his own support system and with his own network.

Ptak: You talk about the value of drafting a letter of intent. What is that and why do you consider it so important?

Haddad: Jeff, that was one of the tools that we first created. Because nobody knows their child like they do as a parent. And all that information that a parent has in their head, the who’s who about their child, the what’s what, their habits, their hygiene, their likes and preferences. What are the triggers that might set them off? Also, who are the agencies or the people that are good people in their life? And who are the people that they should absolutely stay away from? All that stuff is only information that a parent knows. So, we created a fill-in-the-blank versus having parents write out their vision for their child and this long love letter. But it’s more practical, because think about if something happened to a parent, and sometimes it’s the one spouse saying, “I should do this just for my other spouse, because if I got hit by a car, I don’t even think he or she would know what to do.”

So, this way, we have them fill out that letter of intent. And it goes through all the practicalness, as well as the vision. And it’s really important because future caregivers may need to step into a parent’s shoes sooner rather than later. So, it’s almost a quick snapshot, so that they can step in. It will also outline all of the government benefits that that individual may be receiving or not receiving, all of the agencies where they may be getting supports from. And if they’re young children, who’s the advocate in the school system for them? But if they’re older adults, who’s the successor guardian? Or who’s the supported decision-maker? So we need to know all of that stuff that parents just know off the top of their head. So, we think the letter of intent is such an important tool. And it helps with the emotional of who’s going to step into my role if they don’t even know what I do for my kid. So that letter of intent, I know it may seem ominous to fill out for parents, but it’s so important. And then we encourage people to do it, update it, at least on the birthday of the child.

Or, we had one client, they would fill out the letter of intent. And every year they put it in a red envelope. And Christmas morning or Christmas Day, they would pass it out to everybody that was supposed to be involved in their child’s life if something were to happen to them. So, it keeps everybody up to date of knowing all the ins and outs of the child as they change, or as the adult, as they develop and grow and have more access to benefits or less access to services and support. And it doesn’t cost anything. It’s not a legal document, but it’s a great tool. And again, it helps with some of the emotions of helping your child when you’re not able to help and allowing others to just step into your shoes without trying to dig through years of files and piecemeal and figuring out the puzzles. It’s all right there in one spot.

Benz: We want to delve into special needs planning. And your book is called The Special Needs Planning Guide. It’s incredibly detailed and comprehensive. But it seems like a huge challenge in writing about special needs planning is that each situation is just so different. You talked about the huge gamut of disabilities, and it’s not just the disabilities, but also the family and community around people with disabilities that are different. So how did you overcome that challenge to put together the book?

Haddad: Well, Christine, it helps to have a great editor. So that’s important. When John Nadworny and I, we were asked many times and told over the many years ago when we wrote our first edition in 2007, you guys should write a book. Nobody has any of this information. We thought, maybe we should, because special needs financial planning is really not about just the money. It’s about all these other things that we talk about. And we sat down, and John and I wrote every word together and tried to come up with a simplifying process of who would be able to read it. So, we started with a timeline, and we stretched over the timelines. We created the special needs planning timeline that says, based on the age of your child, what are some of the things that you should need? There are the stages, from when a child is first born, age zero to three. There’s certain eligibility for benefits of early intervention, which can make a huge difference in someone’s life. And then once a child turns three, they enter into the public school system. And going from age three, where it’s all family-centered early intervention supports, more kumbaya, if you will, going from home-based early intervention services to public school, it’s like going from a cruise ship to a dinghy. So, parents then have a new world that they have to navigate throughout the education process, the years, educational years. So that’s another stage. And there’s all sorts of federal laws and entitlements for education in the least-restrictive environment.

Of course, when my brother was going to school, they didn’t have all these laws, and he was told that, my mom was told that he was uneducable, but she proved them wrong. And so now we have lots of families that have entitlements and there’s laws in place. And so, journeying through those school-age years until the child turns maybe 16, and then they start to transition into adult services, or they’re trying graduating. But then at age 18, there’s another change, major change and shift in government benefits services and supports, where the child may be eligible for certain government benefits, such as Supplemental Security Income, SSI. There are the issues of guardianship that parents need to address, or alternatives to guardianship. So, age 18 is important planning pressure point. Then when a child turns age 21 or 22 in different states, or in Michigan, it’s age 26, they lose all those federal entitlements for public education in the least-restrictive environment. But what a lot of families don’t know is that from age 18 to 22, those are great years, four years, where your child could still be entitled to educational supports that might be for life skills, for employment training skills. It’s not just about the reading, writing, and arithmetic, but that’s a very transitional time from 18 to 22, that there’s still entitlements for education. They might look different than being in the classroom. Or if they need that classroom and that structure, there are different programs and supports for 18 to 22.

Then once a child turns age, whatever that state’s age—here in Massachusetts it’s 22, in many states, it’s age 22. That’s the age when they pretty much fall off the cliff and they enter into the adult service system, where it’s dependent upon what appropriations, what funding from each state is available for them. And what services, where are they going to live? Where are they going to work? What are they going to do all day? And where are the social interactions? How is that going to happen for them? So that’s, to quote Susan Nadworny, when a child turns, from zero to three, they go from a cruise ship to a dinghy, but at 22, it’s going from that dinghy to a buoy. And parents need to just hang on and figure out what’s ahead of them for their family member. So, it’s a really challenging time. And that’s where the lifelong supports and services need to get in place. It’s also where it’s so important to plan for government benefits, as well as family’s own personal resources and striking a balance.

So, the book we wrote according to the timeline, and then within that timeline of the changes in service and support, we factored in five different factors, which is the financial factors, obviously. The legal factors—what types of legal entitlements, laws are out there, but also about estate planning and different types of trusts. Also, the government benefits, knowing what’s out there, how to access them, how to protect them for their child. Also, the family and support factor—who’s who in your child’s life and how do we help you connect with agencies and support? And are there other family members that you’re expecting? And how do we have those conversations with those family members and obviously the emotional factors. So, the five factors that we cover in the book are the family and support, the emotional, the financial, the legal and the government benefits.

And it depends on where somebody is in the planning process. So, in our book, we broke it down into four basic components. One is to give everybody their planning essentials and we go over the timeline and then talk about what’s the difference between traditional financial planning and how do we overlay all of these unique circumstances for the family member with a disability? So we get the planning essentials and then we talk about the five factors in the next section. Then we talk about a plan for your family, and we have a lot of do-it-yourself, fill-in-the-blank worksheets. And we talk about the financial framework of how you would develop a plan for your family. And then the fourth section, we just go through a bunch of frequently asked questions, give some tips and strategies and talk about the tools that are out there. And hopefully that helps to answer lots of questions that we’ve received over the years. But more importantly, at the end of each chapter, we’ve included in this edition next steps.

So, when somebody’s reading the book, they can just keep a tablet or pad of paper and pencil, the old-fashioned way, and just jot down some of the next steps that they might need to tend to, because it is a process. You can’t do everything overnight. And we always tell folks, look at the book as a resource, depending upon where you are, read what you need at the time that you need it. And that will help to simplify and keep things focused. Even when we do a financial plan for our clients or for new clients coming on board, we won’t give them the book off until we finish because they’re going to get stuck in all this, reading the book and absorbing it. But because it’s across disabilities, so many things might not apply, but it’s a great resource to go back to at times. So, putting the book together, again, it takes a village. But we’ve also shared many stories from our clients that we’ve worked with over the years. And many of the stories that we’ve included in there, or special needs planning tips that we’ve included, are from our experiences, both personally and professionally in working with folks. And we’ve also made sure that this time we’ve included a whole section on building out that team to carry on. That’s now the fifth stage of planning, since our first edition.

Ptak: If you were to distill the three or four jobs that families with loved ones with special needs must accomplish or consider at a bare minimum, what would they be?

Haddad: Jeff, that is a tough question. Because there’s so much to do, unfortunately. The three or four jobs, I would suggest first, write down, take an inventory just from a basic financial planning process. Take an inventory of what you have, your assets, your liabilities, your income needs, your child’s potential for certain government benefits, their ability to earn income. Will they be dependent upon you for the rest of their life? And think about that vision that you might have for them. And just try and get an assessment, financially and with the abilities or likelihood of your child’s abilities and needs in the future. Just to try and shape that framework. And be realistic. Do you think your child will be gainfully employed and won’t need a lot of financial support, but maybe other types of support? If they’re visually impaired, maybe they need just a driver. Maybe they just need enhanced reading devices. If they’re somewhere on the autism spectrum, where are they? What kind of supports will they need? 24/7? Will they need just someone for helping navigating social cues and all that? Developmental disabilities, how much support will they need? How much support are you providing them? So do an inventory financially and also with the needs and ability of your child.

And then I think really importantly, financial and estate planning, is get your estate planning documents in place. And that is making sure that you meet with a qualified, knowledgeable disability law attorney. And there’s a couple of great resources for those, The Academy of Special Needs Planners or the Special Needs Alliance or NALA. And you’ll find a good attorney that really can help you draft those legal documents. And make sure parents have their own powers of attorney, healthcare proxy, HIPAA releases in place. As well as if your child does not need guardianship, make sure that they have their own power of attorney, healthcare proxy, HIPAA release and in many cases, even a will. I know that when we sat down with an attorney for Ron, it was an interesting conversation. But I remember one of our clients saying that their child didn’t need guardianship. But I suggested that they still meet with the attorney and have them create a power of attorney. Who’s going to help them making decisions? There’s also the power of advocacy. Like who’s going to be there as an advocate for them that agencies would want to listen to? And who’s going to be there to help them make healthcare decisions and also get that HIPAA release?

One of our clients who was sharing a story with her son that when he went to meet with the attorney, he said, “OK so my power of attorney that would help me with all the financial stuff, well, that would be my sister.” And then what if your sister’s not available? He said, “I would want this other sibling because they know how to have fun. And I would want them to tell me it’s OK to spend money on certain things that I would want. So, they would agree with me.” And then I said, “What happened with the healthcare proxy?” And of course, the mother thought for sure he’d want the sister, after the mother and father, sure he’d want the sister to go with him. And his point was, no way, I don’t want my sister going private stuff with me to the doctor. But interestingly enough, individuals with disabilities have opinions.

So, it’s really important to get them involved in that planning process. Again, getting their estate planning documents done for themselves and for that individual with special needs, even if it’s not guardianship, really, really important. Doing the inventory, getting the legal documents done, but also reviewing beneficiary designations in all of their retirement plan accounts and their life insurance policies. Because many times when you go and work with an employer, you set up all your benefits and they tell you, make sure you put down a beneficiary. So oftentimes you see the spouse first and then the contingent beneficiary is children equally. Well, the whole premise of special needs planning is protecting that individual’s eligibility for government benefits. And the way to protect that eligibility for many government benefits is to not have more than $2,000 of assets in that child’s name—a child is over the age of 18. So, if you name your child inadvertently, sometimes you write down Johnny Smith, Susie Smith and Sally Smith—you name the children. But many times, you just say “children equally.” Well, if there’s an account that’s split amongst four children and it’s $10,000 or $20,000, well, right then and there, you’ve disqualified that child for government benefits because they would inherit more than that $2,000, which is the limit for eligibility for government benefits. So that’s the third thing. Parents really need to check all of those beneficiary designations.

Also, joint ownership of assets too. So, you want to check the ownership. Now they have transfer-on-death or paid-on-death accounts. Make sure your child is not named directly, because you really want to use the supplemental needs trust to be the beneficiary. And we can talk about that in a minute. And also, fourth and final would be communicate your plan, communicate the vision, communicate what you have in place, what you’ve prepared so that there’s no surprises. And I will never forget a great lesson that I learned. I worked with a parent and the sibling. And the sibling really cared about making sure that they were going to be there for their sister. And the sister lived in another state, and she lived in another state because that’s where the voices in her head told her that she was safe. Well, when mom and dad died, the sister was the one who was the trustee for the sibling. But the sister that had mental illness was the beneficiary of the supplemental needs trust, but her sister was her trustee. Even though all well intentions, all good intentions, they did everything right. But what they didn’t do was let that child know that she wasn’t receiving an outright inheritance like the other brothers and sisters were. Not because of anything of her fault, but to protect her eligibility for government benefits.

And it just caused such a rift in that sibling, the sister’s relationship that was already fragile. So, communicating the wishes, and again, that’s the letter of intent, but having a conversation is so important. Bringing on those successors, those successor trustees, the successor guardianship, the people that you think are going to be stepping into your shoes—one, make sure they know about it and make sure that they can say yes to it or give them a backup and allow them to name a successor to them. So, there’s really important points. And of course, not having more than $2,000 of assets in that individual’s name now or in the future. There’s a lot to do. Those I think are the most important.

Benz: That was a super helpful overview. I wanted to ask about getting advice because it seems like there are two routes. You could see an attorney who focuses on special needs. You could also see a financial planning firm that focuses on special needs planning like yours. So, how should people think about shopping for advice? How should they divide? We all have a finite pool of resources. How should they allocate their advice by across those two different types of providers?

Haddad: We have a checklist in our book of how to identify questions to ask a financial planner when you’re trying to engage their services. But the easiest question that you can ask a financial advisor is if they know the difference between SSI and SSDI. SSI is Supplemental Security Income, which has a $2,000 income limit. And SSDI is Social Security Disability Income, which is an entitlement if someone paid into the Social Security system or if a parent paid into the Social Security system and they retire and begin collecting, or they become disabled and they begin collecting or they die and they’ve paid into the Social Security system, that would be Social Security Disability Income benefits versus Supplemental Security Income benefits. So that’s always an easy question. So, if a financial planner is struggling with how to define the two and how they impact you and your child, then they probably wouldn’t be a good fit, but they may be well-intentioned. And I know that most financial planners that I know and financial advisors that I know are always trying to do what’s in the best interest of their client. But what they don’t know can really harm the future benefits, which could be the link to that child’s services and supports. Even though well-intentioned, they really need to help understand and know what parents don’t already know. But there’s a lot of good people out there.

Ptak: If I’m reaching out to a financial planner or an attorney for help, how important is it that special needs planning be a key emphasis in their practice?

Haddad: I think it’s important, very important, because just as if you would go to your general practitioner, they’re great, they can figure out big-picture stuff. But if you have a diagnosis of a leg injury, you really want to go to the orthopedic surgeon. You really want to go to that specialist. So just like with your financial and estate planning, you’re not going to go to the attorney who did the closing on your real estate to do your estate planning. Well, sometimes you do, but it’s not recommended. So just as if you went to your financial planner, who may have been able to help you to build some savings, they may be out of their wheelhouse to be able to help guide you in the many complexities of special needs planning. And again, what they don’t know could really harm you in your planning.

Benz: You discussed Supplemental Security Income, SSI, as well as Social Security Disability Insurance. But what other types of government programs are in the mix here as families think about providing for their loved ones and making sure that they’re taking advantage of all of the services and supports that they might be eligible for?

Haddad: In our book, we have a great chapter, a whole section on government benefits that a contributing author, Leo Sarkissian, he’s the executive director for The Arc of Massachusetts. He has a great chapter in our book just on government benefits, but really just in the essence of time, there are basically two different types of government benefits. And it’s important for folks to understand there’s entitlement programs, which are funded by the federal government. And then there’s nonentitlement programs that are funded by state government, by state budgets and appropriation. And some of those federal government benefits, those are those entitlements that are needs-based—meaning no more than $2,000 in that individual’s name—would include accessing Supplemental Security Income, SSI. So, it’s a monthly paycheck, but it also gives access to Medicaid. And each state has a different Medicaid program, but you have to qualify for Medicaid and qualifying for SSI would automatically get you on Medicaid.

There’s also, different states have different premium reimbursement programs if someone’s on Medicaid and a parent is also covering them from health insurance. Or there’s other types of benefits such as adult family care or personal care assistance. Those are all entitlements through federal funding that is needs-based. Then those other federal programs that if someone contributed to, they would be eligible for it. That would include Social Security, Social Security Disability Income benefits, Medicare, veterans’ benefits, federal military benefits, and sometimes those civil service benefits. And then there’s those state government benefits. They’re not entitlement programs, but if an individual is entitled to them, as long as there’s enough money in the budget, the state budget, then they may get some services and support. So, they may be eligible, but they’re not entitled to them.

And some of those programs are identified in the transition plan from public school. It’s called 688—different states have different names. A transition plan when the child’s around 16, what state agency will they transition? And those services and programs would be housing. Also, through HUD, Housing and Urban Development. There are rental subsidies, Section 8 housing subsidies. There are also residential supports, transportation supports, adult day service programs, and supported employment services, to name the major ones. So, there are government benefits, federal and state. And there’s laws that you’re entitled to certain services. The big one is through education, but also those federal government benefits that I talked about that are needs-based and others such as SSI and the entitlements if someone contributed, the individual too, to Social Security for Social Security Disability Income benefits. So, there’s a lot out there. And it’s about a balance between those government benefits and supplementing what those governments can be providing and what a family can provide from their own personal financial resources during the lifetime of the parents and during the lifetime of the individual planning for two generations, two retirements. So, it’s really important to make sure that there’s a balance.

Ptak: Special needs trusts are an essential component of special needs planning. Can you discuss why they’re important and how they work?

Haddad: Yes. This is the basic, basic tool in special needs estate planning because when you’re thinking about transferring your wealth and you’re leaving an inheritance to your children, sometimes to your children equally, and what’s equal is not always fair, what’s fair is not always equal, but you don’t want to leave more than $2,000. Even if your child may not be receiving government benefits today, if you leave them a direct inheritance, that might knock them off of future government benefits if they need them. So instead of leaving an outright inheritance, there’s the wonderful tools called special needs trusts. And parents or individuals can leave as much money in a special needs trust to the individual without disqualifying them for government benefits. So, there’s basically three types of special needs trust. There’s what we call the first-party special needs trust, which would be money that’s already in the individual’s name or a legal settlement, an inheritance. If there’s an onset, later onset, and there’s money in that individual’s name, they can transfer their wealth to a first-party special needs trust and qualify for government benefits. Upon their death, Medicaid, or whatever government benefits they received, would get paid back.

But the most common tool that we use in special needs planning is the third-party special needs trust. And that’s the tool that’s established with other people’s money: parents, grandparents, aunts, uncles, brothers and sisters. You can leave money to a third-party special needs trust, and it won’t disqualify them for government benefits. And if its other people’s money going into that third-party special needs trust, there’s no Medicaid payback. And whoever creates that third-party special needs trust gets to say who’s the remainder beneficiary. So, for example, everything can go to the beneficiary. You name the child’s trust for their share of wealth or the distribution of wealth or in a beneficiary designation, instead of naming children equally, you name each child individually and the child’s special needs trust instead of their named individual.

So, you can leave as much in there. The key is making sure that that trust is properly drafted, and the language says that it’s intended to supplement what the government will provide. There’s also the trustee that you need to name somebody. Oftentimes it’s the surviving parent, but it could be a brother or sister, it could be a professional trustee, it could be a corporate trustee and have a family member as the advisory trustee or the trust advisor or the trust protector. So, without all that responsibility of a fiduciary, but keeping the other family members involved. So, then the third trust is a pooled trust, which is usually through a charitable entity, a nonprofit organization. And again, that’s established with the individual’s money. There’s a Medicaid payback and there’s no remainder beneficiary because it would go back to the nonprofit organization. A portion of it would. So, the tool that we use most common is that third-party special needs trust.

Benz: Can you talk about how one funds a special needs trust and the timing of that? I’m wondering, from a practical standpoint, do most such trusts, the third-party trusts that you talk about, do they get funded after the death of the parents?

Haddad: Yes, they do. The third-party special needs trust is often funded upon death. And one of the easiest tools is using life insurance to fund the third-party special needs trust. So, the beneficiary of life insurance is often the third-party special needs trust. But also, with the SECURE Act now, a properly drafted, current third-party special needs trust could be the recipient of an IRA or a qualified retirement plan and not have that 10-year payout. It can stretch the distribution over the lifetime of the beneficiary. So, there’s some tax planning strategies using a special needs trust. Again, it has to qualify with all these different provisions. And you can name the beneficiary of a retirement plan. Whereas in the past, we would say, oh, goodness, use the life insurance tax-free to go into the trust. But now it’s a great tool because of the SECURE Act, is to use the retirement plan assets, too. So, most of the time, the third-party special needs trust is funded at death. When we fund them during the lifetime, it’s usually for estate tax-planning purposes and gifting, but not for small amounts. We sometimes will use an irrevocable life insurance trust for grandparents if they’re gifting and structured around a life insurance policy in that islet. But most of the time, it’s upon death or for estate planning purposes.

Ptak: Can you discuss how trustees work for special needs trust? What are the responsibilities? Is the parent typically the trustee, a sibling, someone else? Can you speak to that briefly?

Haddad: Of course. Because this is, as my partner, John Nadworny, had said, when you go to the attorney and you’re thinking about creating your estate planning documents and here you’re asked on the spot, well, who do you want to be the trustee? And John said, I spend more time trying to figure out what I’m going to order on the menu for dinner than how much more time they’re often given to think about who are you going to name as the trustee for your child’s special needs trust. So, the point is, you need to put some thought into that role, especially if there’s divorced parents. That’s another tricky, sticky situation that parents need to think through and they might want to make sure that they have a professional trustee in place, which could be an attorney. And of course, you want to make sure that they are familiar with your child’s diagnosis and support needs, and they know how to navigate, how to spend that money and make distributions. Or it could be a corporate trustee and so many corporate trustees have not always wanted to be the trustee for special needs trust because of the distribution rules. But now we’re seeing more and more corporate trustees stepping up to the plate because it’s an important part of their role.

But many cases, and we encourage, if there’s a family relationship, to have a family member. Who do you trust to be that trustee, that trusted person? But they can also have a backup or be co-trustee with another fiduciary, with an attorney or professional trustee. And sometimes a corporate trustee, they’re OK to have a family member on board, but they’re responsible for all those real tough fiduciary decisions and distributions. So, it depends on the dynamic of the sibling relationship. And I will say it’s across the board. Folks that have a family member with Down syndrome have a great loving relationship or some nice interaction in the family dynamic. It’s wonderful that they would want to step up and they would expect to be the trustee for their brother or sister without even knowing what they have to do. But then there’s the folks that there may be a strained relationship over the years as a brother or sister and they would not be a good fit to be the trustee. And who’s going to be the naysayer if there’s some aggressive behavior? And we’ve had this where, the sister was left as the trustee, but the brother was very abusive and kept saying, you need to give me my money, you stole my money. And the sister just couldn’t handle it anymore because it was abusive to her, to her family. And it was getting really out of hand. So, we had her resign as trustee and we put a professional trustee in place. And if she had that professional trustee in place beforehand, they would have been the naysayer to, no, we can’t give you that amount of money to buy that Ferrari.

So, the trustee is very important of that role. Using the special needs trust just as another thought that I don’t think I mentioned. In the past, if you didn’t know that there were these third-party special needs trust that you could leave an inheritance to, families were told to disinherit their child with special needs and instead leave their share of the inheritance to one of the brothers or sisters. And hence, that became a morally obligated gift. And we’ve had a situation where the brother and his wife did a wonderful job taking care of their brother. We’ll call him Johnny. And mom left a whole bunch of money to Bobby to take care of Johnny, but not in a special needs trust because she trusted her son to do what was right for his brother. But when his children went to apply for financial aid, he had all this money in his name. And it’s not like he could say on the FAFSA, “Well, that money is not intended for my children’s use; it’s intended to stay in my name to defraud the government to protect my brother’s eligibility for government benefits.” So that backfired on him.

So again, leaving a morally obligated gift to another person to take care of that individual with disabilities is just not a good situation for many, many reasons. But bringing that special needs trust into the picture, into the equation can really make a huge difference. But thinking about who that trustee is. Also, we have the trustees that come in and meet with us with the aunt, the uncle, the brother, the cousin, whoever’s going to be the successor trustee, so they get to know who we are. We know about the values of money for our clients, and they have an instant connection to know that, OK, if something happens to my parents, I know who to call. And it’s the team that we have in our firm and beyond that will be there for them. So, it’s really important to get those trustees, get to know them.

Benz: I wanted to ask about another huge topic, which is housing. It’s a key challenge for people with special needs in their families to get that plan for housing. It sounds like your family arrived at a very satisfactory arrangement for your brother. But can you discuss the key options along with their financial ramifications for people with disabilities?

Haddad: Christine, that is the million-dollar question. Where do people with disabilities live? And when we’re chatting with families and they’re under this enormous pressure that once their child turns 22, they should have housing set up for him or her. And I remember chatting with a mom over coffee, and she was just stressed out about where her child would live when he turned 22 and graduated from public school. And I said, well, where does he live now? And her point was he lives at home. Well, how’s it going with him living at home? And then she started to tell me how wonderful it was that he was living at home. He can make his own peanut butter and jelly sandwich. And he’s part of the family and the neighborhood and everybody loves him. And he’s just so happy. And when she was telling me that, she thought and she paused and she said, “You know what? I don’t have to find him a house outside of the family home right now when he turns 22. I have time to think about it and plan and think about where he needs to be and who he needs to be with.” And she just had this great sigh of relief that there wasn’t a deadline. But with that said, there is a deadline.

And I know Ron didn’t move out of the house until he was well into his 40s. And it wasn’t for my not pushing and encouraging and saying, if something happens to you. I need to mourn. I’m not going to be able to take care of Ron if I’m trying to figure out what am I going to do without my parents? So, we started on that journey. And as I said, John also started on that journey for his son, James. But people with disabilities today can live and work in the community in so many ways. But I think doing that assessment, and we have all these tools in our book too, is taking an assessment of what they need and in different types of needs. Is it medical assistance? Is it bill-paying assistance? What types of needs do they have? Is it 24/7 care? Do they have to have one-on-one? Are they medically complex? Do they need someone to just help them, check in with them once a week, make sure that they have enough food in their refrigerator, that their medications are laid out for them? What is it that they need? And what does that look like? Is it in a public, busy city, rural environment? Is it with many housemates or one roommate? Or are they able to live alone?

So, it’s pulling all that information together of what are the needs and abilities of the individual? What are the preferences of the family and, more importantly, of the individual? But also, where is the money coming from? So that’s when the state supports the state agencies that may have funding—many do not have funding, and it depends on where you are, your child is, and the priority of funding for residential supports. But one thing that we tell families all the time to keep in mind is that just like the rest of us, I don’t still live in the apartment that I first lived in when we got married. We don’t live there. We’ve moved around a couple of times. And people with disabilities, even Ron, he moved into one apartment, moved to another apartment, and now he’s someplace else. So, it can evolve over time. And just to think about that vision and how to build it. And again, it’s finding out what’s out there for government benefits and balancing it with your own personal resources to complement and find that balance.

And then how do you maintain that? And again, that’s where your financial and estate planning need to tie in with each other. Using an ABLE account, Achieving a Better Life Experience, a qualified disability savings account, you can leave money into an ABLE account up to $17,000 per year, but only one ABLE account per person. The money that’s in there can be used to pay rent and for housing. Whereas it might be too expensive for that individual’s government benefits to provide that quality of housing. So, it’s knowing how to navigate the government benefits and the personal financial resources and tools that are out there. Also thinking about renting, buying. Shared living is a big deal now. Living with a family that would provide care just as a family. And that child is part of that family or that caregiver’s life. So, there’s so many different ways that are creative ways of folks living in the community and being productive and happy and having a full life. It’s just a matter of doing an assessment of what the needs and abilities and the resources are that are out there. And it doesn’t happen overnight.

Benz: Well, Cindy, this has been such a helpful conversation. Thank you for being here and thanks for doing the work that you do.

Haddad: Oh, Christine, thank you so much for allowing me to share some information and hopefully increase awareness of planning for people with disabilities.

Ptak: Very much so. Thanks so much.

Haddad: Stay well.

Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify or wherever you get your podcasts.

You can follow us on Twitter @Christine_Benz.

Ptak: And @Syouth1, which is S-Y-O-U-T-H and the number 1.

Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at [email protected]. Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. While this guest may license or offer products and services of Morningstar and its affiliates, unless otherwise stated, he/she is not affiliated with Morningstar and its affiliates. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)