Top Financial Mistakes to Avoid for Special Needs Dependents

The webinar was a presentation followed by a Q&A session. Kelly and Jerry shared common pitfalls that can jeopardize long-term care and benefits for special needs individuals. While every plan should be tailored, avoiding common mistakes can make a powerful difference.

Key takeaways from the webinar:

The biggest mistake is not planning at all. Without a plan, someone who does not know your loved one or their needs, possibly even a court, could be left to make decisions on their behalf. Delaying legal and financial planning puts their future stability and support at risk.

Every plan should reflect the individual’s unique needs and goals. Thoughtful planning should be tailored to the person’s lifestyle, independence, and long-term support needs.

Prioritize completing a Letter of Intent. While not legally binding, it can serve as a roadmap for your loved one’s future. By outlining preferences, aspirations, and important considerations, the Letter of Intent ensures that your loved one’s needs and desires are understood and respected, even in your absence. Example: MassMutual Letter of Intent

Be mindful of well-intended but risky financial decisions. This includes naming the individual as a direct beneficiary on life insurance or retirement accounts, savings bonds, or making gifts without coordinating with the overall plan.

Avoid leaving assets directly to the individual. Giving money or property directly to a person with special needs may disqualify them from essential government benefits. A Special Needs Trust (SNT) can preserve these resources while maintaining eligibility. There are several types:

• First-Party (Self-Settled) Trusts: Funded with the beneficiary’s assets, such as from a legal settlement or inheritance. These are subject to Medicaid payback after death.
• Third-Party Trusts: Funded by others, such as family members, and not subject to Medicaid payback.
• Pooled Trusts: Managed by nonprofit organizations, combining funds from multiple individuals for investment while maintaining separate accounts. Available in both first- and third-party formats.

Consider an ABLE account as a complementary tool. ABLE (Achieving a Better Life Experience) accounts allow individuals with disabilities to save money without affecting their SSI, Medicaid, and other public benefits eligibility. Funds in an ABLE account can be used for qualified disability-related expenses such as housing, education, and transportation. While ABLE accounts have contribution limits and other restrictions, they can be valuable to a broader financial plan.

Applying for Government Benefits such as SSI, Medicaid, or other government programs can be complex. Before applying, correct any known errors or missing information to avoid unnecessary delays. Denials do occur, and if denied, request a reconsideration; it’s often faster than a formal appeal, which can take months or even years.

Planning may feel overwhelming, but it is one of the most meaningful ways to protect your loved one’s future. With the right guidance and resources, you can create a plan that brings peace of mind and lasting support for the years to come.