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You Should Plan For the Unexpected With Short-Term Disability Insurance

December 20, 2021Filed Under: Estate Planning, Special Needs

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Sandy worked full time and was the sole caretaker for her 85-year old mother. Sandy would help her mom in the evenings and weekends. Unfortunately, Sandy was in a serious car accident and would be out of work for at least 8 weeks. She now faced the challenge of paying her bills while out of work and finding someone to help her mom until Sandy could get back on her feet.

There are only so many ways you can plan for the unexpected.  Short-term disability insurance is one.  Yet many people may not know exactly what short-term disability is or how it can benefit someone who has experienced an unexpected illness or injury that may prevent them from being able to work for an extended period of time.   There are also the planned events, such as surgery to correct a chronic health issue for which you will need some income to help cover the procedure and other expenses incurred during your time away from your job.   It is estimated that on a yearly basis, an average of 5.6 percent of workers in America will have a need for short-term disability.  Here is an overview of what short-term disability insurance is and what it can and cannot do for you during the unplanned and most likely unwanted downtime you hope you never have.

The short-term disability is used for non-work-related illnesses or injuries, as opposed to a worker’s compensation policy, paid for by the employer, that provides income replacement for a work-related injury.   As the name suggests, short-term disability is active for a limited time, is often offered as part of a benefits package, and may be purchased on your own through a private insurance agent if your employer is not mandated to offer it.  Currently, there are only five states where it is mandatory for employers to offer this type of coverage to their employees.  These states are California, New York, New Jersey, Hawaii, and Rhode Island.  Of note, the income replacement from a short-term disability insurance policy will seldom cover 100% of your income but typically will cover anywhere from 40% to 70% of your income depending on the policy terms.

The time covered by short-term disability can range from 30 days to sometimes up to a year depending on the policy, but it is important to know that your job is not guaranteed should you need to use short-term disability.  It may be possible to transition to a long-term disability plan once short-term benefits are used up and you are not ready to return to work.  Another important thing to know is what the elimination period is for the policy.   Employers do not want to start paying for an illness or injury that could possibly be covered by an employee’s “sick days” fund, therefore there is an elimination period associated with the policy, which means that the policy may dictate how many days you would have to be off work with the disability before a claim could be filed.

Fortunately, there are many conditions that qualify for short-term disability that even include many mental health issues.  As mentioned earlier, if there is a need to be off work for a planned procedure that will render you unable to return to work for a while, you will want to be sure your policy covers that issue and time needed to recover when planning for your care needs.   There may be limits to what one employer covers versus another, and conditions that are covered should also be part of your consideration when choosing a plan should you decide to purchase your own policy.   Unfortunately, pre-existing conditions are not covered by short-term disability, nor can benefits be used to take time off from work to care for other family members who are sick or injured.   In general, the short-term disability plan, when you are informed and knowledgeable of how it works, can be a benefit that may provide some peace of mind should an unexpected health crisis happen.

We help people of all ages plan for the unexpected so that their wishes will be carried out. Through the use of legal documents like a living trust, power of attorney, and health care directives, we make sure your home, your savings, and your family are taken care of if the unexpected happens. If you have questions or would like to discuss how you can plan for the unexpected, please don’t hesitate to contact us. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

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Avoid These Mistakes When Planning for a Disabled Family Member

December 13, 2021Filed Under: Estate Planning, Special Needs

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Did you know the largest single minority in this country are the 58 million Americans five years of age or older that are identified as special needs? The majority of federal and state benefits available to help persons with disabilities are needs-based, meaning income and assets are strictly limited and can often be misinterpreted, resulting in costly mistakes.

One of the most common mistakes a parent or loved one makes is disinheriting their family member with special needs. The reason is often that the family believes other siblings will step in and take care of the disabled family member. However, this can lead to numerous problems, especially if the non-disabled sibling gets sued, divorced, or otherwise loses the money left to them.

Another common mistake is failing to create a properly drafted trust to qualify the disabled family member for government benefits that can help pay for costly medical and/or living expenses. Qualifications for government benefits like Supplemental Security Income (SSI) or Medicaid dictate that the disabled individual has no more than $2,000 in assets. If your disabled loved one has assets above this threshold, they will have to be “spent down” to qualify for government assistance or otherwise protected in a properly drafted trust.

Well-meaning friends and extended family may not understand the complexity of disability benefits and give a disabled loved one money or assets that would disqualify them for state and federal benefits. It is especially difficult if the disabled person already has benefits and becomes disqualified because the “needs-based” review discovered additional funding putting them over the $2,000 asset limit. It is best to avoid this situation as it is a big hassle to re-qualify your dependent for government assistance.

Be wary of crowdfunding sites like GoFundMe to benefit your loved one with special needs. In the absence of qualified legal planning, these donations can disqualify SSI, Medicaid, food stamps, and section 8 housing. A well-meaning fund campaign could cut the benefits of a disabled person and make their living circumstances worse than before.

What to do? Plan ahead! There are several ways to provide for your special needs dependent and stay within government guidelines for additional benefits. One of the best ways is to establish a special needs trust that has the specific purpose of supplementing federal and state assistance programs. By doing so, a disabled loved one can benefit from government programs and have additional money to supplement what those programs provide.

There are strict rules when it comes to creating special needs trusts for a disabled family member. There are also restrictions on what the money can be used for. We can help you determine what type of trust is best based on you and your loved one’s particular circumstances. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

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It Is Crucial for Parents With A Special Needs Child to Prepare an Estate Plan

November 22, 2021Filed Under: Estate Planning, Special Needs

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Medical and health care developments have made it feasible for dependents with special needs to live higher-quality lives than ever before. Many scientists regard the term special needs as a euphemism for disability. Yet, the difference between the two terms is primarily one of acceptance and preference as both terms describe the four major types of disability: physical, developmental, sensory impaired, and behavioral/emotional.

When you have a child with special needs, it is crucial to plan their future with the utmost care as they will meet additional challenges to care for themselves and their lives. According to the US Census Bureau, between the years 2008 to 2019, the biggest increase in special needs was the experience of cognitive difficulty, which saw a large jump in prevalence.

Careful estate planning for parents with children of special needs is necessary to ensure government benefit access remains without foregoing family support. Below are some basic planning tips to consider to protect your child with special needs. If you would like to explore these options in more detail, please give us a call to set up a confidential meeting.

While your child is a minor, be sure you and anyone caring for your child has signed appropriate directives that specify who should care for your child in the event you are unable to. You may also consider preparing legal documents that name a guardian for your child, again if you are unable to care for your child or in the event of your death.

Once your child is an adult and has the legal capacity to sign documents, that child should have their own set of advance directives naming a trusted agent.

There are several types of special needs trusts. A First Party Special Needs Trust receives its funding from the special needs person as long as they are under 65. The funding mechanisms may be lawsuit proceeds, inheritance, or lump sum disability benefits. This trust can be established by the special needs child, parent, grandparent, or guardian and, when drafted properly, will not affect eligibility for the special needs person’s government benefits.

A Third-Party Special Needs Trust permits family members to use their assets to fund a trust to benefit a person with special needs without negatively impacting that person’s eligibility for government benefits. The funds in this trust type do not have a payback provision, allowing any remaining assets to pass to other beneficiaries as designated by the trustmaker and can be created during a lifetime or under the instructions of a will.

Finally, a Pooled Trust is a community trust that a non-profit organization manages to fund the needs of many special needs beneficiaries. In essence, the non-profit acts as a trustee and can be a good option for small families or those who seek non-family member trustees. The property held by a pooled trust for the beneficiary should not affect eligibility for government benefits.

If you have a life insurance policy or are considering one, you can make the proceeds payable to your third-party special needs trust. Leaving permanent and term life insurance policies to this trust type will not affect the child’s government benefits. If you have retirement accounts, those may be payable to the third-party special needs trust as well if there is a balance at the end of the account holder’s life.

It is not advisable to leave property for the care of your special needs child to a third party, such as another child. This third-party designate has no legal obligation to follow your wishes, leaving the use of your money to the discretion of that third party. As this type of arrangement is not legally enforceable, your child with special needs will be wholly unprotected after you die.

Create an Achieving a Better Life Experience or ABLE account. This type of account is not unlike the idea of the 529 College Savings Plan. An individual experiencing their disability before 26 years old can deposit up to $15,000 per year into their ABLE account. The account grows tax-free and can pay qualified expenses to maintain or improve quality of life. An ABLE account can also receive funds from parents, other family members, or friends who want to contribute to the account. Most government benefit programs are not affected by ABLE account funds.

There are many intricacies to consider when creating an estate plan that involves a special needs child. We help clients with their estate planning needs and would be happy to meet with you at your convenience to discuss your situation and determine the best plan for you and your family. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

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Planning for Disabled People to Live Their Best Lives

November 8, 2021Filed Under: Estate Planning, Special Needs

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Enabling the Disabled

Family funds can be carefully managed to fit the disability-benefit rules and still provide additional perks for the disabled person to enjoy. And, though the rules can be strict, disabled people are still permitted autonomy to own some money for their personal use and yet retain their valuable benefits.

For the disabled who have formerly worked

People in this category have contributed Social Security deductions while employed, but they can’t work now due to disability. These people can get benefits of around $1,000.00 monthly, and Medicare coverage, under the Social Security Disability Income program (SSDI). This program permits the disabled to receive income from any source and still get benefits, as long as that income is not earned from employment but, for example, from investments or inheritances.

If there is a family member in this position, and if there are other elder family members who are concerned about qualifying themselves for long-term care Medicaid benefits, the elders’ funds can be funneled into an irrevocable trust to benefit the SSDI recipient. There is no penalty against the elder for that kind of gift, even if the elder makes it during the five-year Medicaid look-back period. This strategy can preserve many thousands of family dollars.

For the disabled who are impoverished

The program for people in this category is called Supplemental Security Income (SSI). The purpose behind this program is to provide for people’s basic needs like food, shelter, and medical care. SSI pays an average of around $800.00 monthly plus Medicaid coverage and Section 8 housing assistance. These benefits are available for people who are disabled, who have not worked and have not contributed to the Social Security system, and who own no more than around $2,000.00.

Financial planning under SSI must be done carefully to preserve these benefits, but they are worth the trouble; the medical benefits are especially valuable. The SSI rules are fairly complicated. Gifts of the “wrong” kind – even simply stocking a disabled family member’s freezer – could cause benefits to be reduced or lost.

Young people who became disabled before they turned 22 may be eligible for another program, comparable to SSI, the Childhood Disability Benefits program. The rules under this program resemble SSI rules, but with additional wrinkles to do with the parents’ Social Security status.

What a difference one letter makes

It is essential to know which program the disabled person is under. SSDI recipients enjoy the freedom to inherit or receive (but not to earn) money. SSI recipients do not enjoy that freedom. The addition of one letter in the acronym – a “D” – makes a big difference.

Trusts for the disabled

Trusts aren’t just for the rich. For disabled people, trusts are essential to shelter money for their benefit. Think of a trust like a treasure chest. The original owner stocks the chest with money and property. The assets are then managed according to trust instructions. For the disabled, those instructions detail how the money is to be spent, to ensure that the disabled person’s benefits aren’t jeopardized.

If money is left in a will, the will must also create a trust suited to retaining disability benefits. The days are long past when a two-page will would do the job.

Party of the first part, the third part, or everybody into the pool

You may remember that scene from the movie Night at the Opera, where Groucho and Chico tear out hunks of a contract identifying the parties. In the disability context, though, there’s an important difference between a first-party trust and a third-party trust.

Let’s say Sally became disabled before she was able to work. She sued an insurance company to compensate her for her injuries. She has been waiting years for the settlement to come in. In the meantime, she is disabled from working, she ran out of resources on which to live, and, thus, she qualified for SSI benefits. Now the settlement has finally arrived – but she still wants to protect her SSI benefits, especially for medical costs. Accepting the settlement money directly could put an end to those benefits.

Sally should put her settlement into a “first-party” trust. This kind of trust must provide that whatever money is left in the trust after Sally dies be paid back to the government for what it paid on Sally’s behalf. If Sally’s trust is set up like that, she will continue to receive SSI.

(There is a host of names for this kind of trust, including “self-settled” or “d4a or d4c” or “payback trust” or “special needs trust” or “supplemental needs trust” or “SNT.” All these monikers refer to the same “first-party” idea.)

Now let’s say that Sally didn’t sue, but her generous grandfather wants to give her money. Grandfather’s lawyer stops him from giving Sally money straightaway in a lump sum, because that would lose Sally her SSI benefits. Instead, the lawyer puts grandfather’s money into a “third-party” trust for Sally’s benefit. (Grandfather is a third party.) Third-party trusts contain highly specific conditions under which money can be paid to Sally, only for perks that are above and beyond Sally’s basic needs that SSI pays for.

If, on the other hand, the disabled beneficiary is over age 65, a “pooled” trust can also be created, with either “first-party” or “third-party” funds. The trust pays out and is managed, by a nonprofit organization that is knowledgeable about the disability rules and that aggregates smaller trust assets into a larger fund. This kind of “pooled” trust – similar to the “first-party” trust described above – must also contain provisions to pay back the government and the nonprofit after the disabled beneficiary dies.

A bank account of one’s own

Disabled people are also permitted to keep their benefits plus their own bank account, known as an “ABLE” account (“Achieving a Better Life Experience”). In an account like this, the disabled can deposit and spend around $12,000.00 or more annually, depending on state law, up to around $100,000.00 total deposits. The general idea is that even SSI benefits can be retained and ABLE money can still be spent on anything that legitimately improves or maintains a disabled person’s health, independence, or quality of life.

So, while the rules hedging disability benefits can be complicated, the basic premise is this: that the disabled may stay well, enjoy themselves, and participate as integral members of community life. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

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Olivia K. Smith, Attorney at Law
Cornetet, Meyer, Rush & Stapleton Co., L.P.A.
123 Boggs Lane,
Cincinnati, Ohio 45246
Tel: (513) 771-2444
Fax: (877) 483-2119
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Olivia K. Smith, Attorney at Law
Cornetet, Meyer, Rush & Stapleton
123 Boggs Lane
Cincinnati, OH 45246
Phone: 513-771-2444
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oksmith@cmrs-law.com

Family Law Attorney Olivia K. Smith, LLC represent clients in Cincinnati, Anderson Township, Batavia, Loveland, Mason, Milford and other communities in Hamilton County, Clermont County, Butler County and Warren County.

Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. I invite you to contact me and welcome your calls, letters and electronic mail. Contacting me does not create an attorney-client relationship. Please do not send any confidential information to me until such time as an attorney-client relationship has been established.

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