All parents worry about their children's future. When you have a child with special needs, however, that worry is often increased ten-fold. For parents with a special needs child, great care has to be given to not only the child's emotional, mental, and physical health, but also to their financial well-being.
In the current age of health care reform, many parents are struggling to understand how the Affordable Care Act ("ACA") will affect their special needs child. Because, for the first time ever beginning in 2014, insurers will not be able to deny coverage for any child based on a pre-existing condition, special needs children will have access to affordable private health care coverage. In addition, in 2014, insurers can no longer institute lifetime limits for most plans. The ACA also requires that insurers offer wellness programs such as child screenings and immunizations; dental and vision will be added to the list by 2014. These changes mean greater options for children who previously could only be covered by Medicaid. For children enrolled in the Children's Health Insurance Program ("CHIP") under Medicaid, the ACA requires states to maintain current eligibility standards and benefits until 2019.
These are welcome changes, but the ACA also has some cons. For people in states that do not elect to expand Medicaid, it is unknown how much health insurance will cost after ACA implementation. In addition, health care Flexible Spending Accounts ("FSAs") are now limited to $2,500 per year, per family. Before the ACA, private employers were free to set their own caps on health care FSAs. Traditionally, parents with special needs children have put a lot of money into their FSAs so that costs uncovered by Medicare or private insurance, such as therapies or equipment, could be paid for through the FSA.
As parents weigh their options for health care coverage for their special needs child, it makes sense to consider another way to protect the child's financial future. A special needs trust can be established for children who are unable to manage finances and who have insufficient assets to pay for medical care or for the necessities of life. This kind of trust is ideal because it can keep a disabled child qualified for Medicare and Social Security Disability ("SSI") benefits. If an adult child with special needs accumulates more than $2,000 in assets, then he or she will cease to be eligible for SSI. Thus, an inheritance given outright to a child at a parent's death may disqualify him or her from receiving necessary governmental assistance. Money placed in a special needs trust, on the other hand, will not disqualify a child from receiving benefits.
A trustee will be in charge of monitoring and dispensing funds from the trust for the child's benefit. A trustee can be an individual or an institution, such as a bank. Funds in the trust can be used for a wide variety of things, such as transportation, education, or rehabilitation - things that often go uncovered by government benefits.
Every child is special. For those with special needs, creating a special needs trust will give you peace of mind and protect your children's finances, no matter the changes that may come and go with health care reform. A special needs trust can serve a child for the rest of his or her life and ensure they are well cared for even after you are gone.© 2013 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.