Have you ever received a gift that you wish you could give back?

I have...envision a full-size Rascal Flats fleece blanket.

What if I told you that when planning for an individual with special needs, money is often the worst gift they could receive?

A gift of cash, or even a gift card, is considered a usable resource in the eyes of the Social Security Administration and Medicaid. If our person’s usable resources exceed $2,000, it can affect services from federal programs.

Simply put, the one who needs the money the most can’t have it.

It is heart-warming to think about how much our families love our children, who, without question, need every advantage they can grasp, except this one. The rules are backwards, but just like the Dude from The Big Lebowski, we must abide.

So, what can we do?

1. Consider setting up an ABLE (Achieving a Better Life Experience) account. In the state of Georgia, we refer to it as a STABLE account. ABLE allows our person to have available resources above and beyond the $2,000 maximum and still maintain qualifications for SSI and Medicaid. Important note: this option has its own limitations and should be discussed with a financial advisor who is familiar with how these accounts work.

2. A stand-alone 1st party or 3rd party (preferred) Supplemental Needs Trust. An Estate Planning Attorney must draft a Supplemental Needs Trust. I highly suggest using an attorney who has significant experience with these types of trusts. Please note that the primary distinction between a 1st-party SNT and a 3rd-party SNT is the Medicaid clawback. The source of funding for the trust will be a key factor in the decision between first- and third-party SNTs.

3. Start planning now. Surprise gifts do happen. Sometimes they are sweet and generous gifts. At other times, gifts are a result of the loss of a loved one. Either way, the process remains the same, and having the legal and planning work in place is essential.

4. Have the conversation. A key question we ask during our SustainAbility Planning process is, “Do you know if our person may be the beneficiary of a gift or estate?” Planning is an exercise in protection and preparedness, not an act of greed, I promise.

So what should we not do?

• Leave it to Brother, Sister, or Cousin. Arguably, a bad plan. Why, may you ask? For starters, we have gift taxes, as well as potential capital gains taxes, for the holder. From there, issues include, but are not limited to, moral compass issues, financial mismanagement, or even outside lawsuits if the “owner” is sued.
• Open more than one 1st-party or 3rd-party SNT for the same person. While it is pretty standard for an individual to have both a 1st-party and a 3rd-party SNT, we do not suggest having multiple of each type. We understand that there is no law against this, but just like my Facebook relationship status in college, it’s complicated.

In no offense to the Rascall Flatts, but “What Hurts the Most” (this is a joke, look it up) for our families is having to abide by trust law, tax code, as well as Medicaid provisions. While these may seem restrictive, receiving generous gifts from family members doesn’t have to seem complicated or be dreaded. The planning and legal process can help families navigate these issues, providing clarity and financial solvency for their loved ones in the years to come.

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