Wednesday, December 16, 2009

Financial expert says families should be careful about buying expensive gifts for disabled relatives, benefits could be jeopardized

From Tim Grant at the Pittsburgh Post-Gazette:
At 20 years old, Sarah Michael is mentally retarded and cannot read or write, but she understands the spirit of Christmas. And like any child with a first-grade mentality, she loves it.

"In the past, we've given her a DVD player and DVDs so she could watch movies while we travel," said her mother, Linda Michael, of Leetsdale, Pa. (The Michael family is pictured.)

This year, Mrs. Michael and her husband, Tom, are considering a very special, yet pricey surprise for their daughter -- a specially adapted Wii. However, they must be careful about how they go about making the big-ticket purchase.

This may be the season for giving, but friends and family members of children with special needs can do more harm than good if their gifts end up jeopardizing the child's eligibility for medical and Social Security benefits.

The federal government has strict limits on how much money or assets a disabled child can have in his or her name. If a child with special needs owns more than $2,000 in total assets, the government can freeze critical benefits such as Medicaid, Medicare, Supplemental Security income or Social Security income.

"We see a lot of holiday celebrations, birthdays, communions and bar mitzvahs where people make several small monetary donations to special needs children, and if those compile over $2,000, their benefits are in jeopardy," said Helen Sims, a special care planner with the Downtown financial planning group Guyaux Mandler Mah, which is affiliated with MassMutual Group.

Nearly 5 million children in America have physical, emotional or mental impairments, according to the U.S. Census Bureau's 2006 Americans with Disabilities report. If assets owned directly by a disabled child exceed $2,000, families are obliged to report it. In addition, the state welfare department periodically conducts audits.

Families with disabled children can provide more security for them without disqualifying the child from government benefits by creating a special needs trust. Any money the child receives through gifts or inheritance can become part of the trust. The trust does not belong to the person with the disability, but he or she is the beneficiary.

The holidays can be an especially tricky time because, depending on what gifts the parents want to use the special needs trust to provide, it's up to the state Department of Public Welfare to decide if those gifts are allowable expenses.

Ms. Sims said she was aware of another family that has used their trust to provide their child with an adaptive Wii. But those approvals are not always guaranteed. The state agency could have deemed it an inappropriate expense for the trust. The adaptive model costs several times more than the $250 basic model.

The Michael family has not asked for permission to buy the gift from her trust. They may buy it with their own funds.

"There are two sides," Ms. Sims said. "Being able to give gifts to a child through the trust and being able to give gifts directly to the child. You have to be aware of what those requirements are and how those monies are spent so that they fall within the guidelines of DPW."

The Michael family has had to educate relatives on the rules. "Sarah has a very elderly aunt who wanted to leave her something in her will," Mrs. Michael said. "We had to be very careful to tell her not to leave it directly to Sarah."

Another issue that can come up around the holidays is maintaining traditions, if something happens to a special needs child's parents or caregivers. That can be done through a "letter of intent."

A letter of intent explains in detail how to care for a particular child, including information on likes and dislikes, medications, diet, churches and what makes them tick. Very often children and adults with Down syndrome, cerebral palsy, brain damage, autism and mental retardation are not able to communicate their preferences to a new caregiver.

"In a letter of intent, the family could specify the types of traditions they want to continue for Sarah and the types of gifts that she has received and the time of year those gifts are provided," Ms. Sims said.

She said as much as there's concern about the disabled child receiving gifts, there's also the matter of how the child will be allowed to give gifts.

"Everyone has their holiday traditions," Ms. Sims said. If the family goes on vacation over the holidays every year, the family might want to be sure her trust has the funds to maintain that lifestyle.

Or, "If Sarah is used to giving gifts to everybody in the family and Tom has several children, they need to make sure that her trust is properly funded so she may participate. So, all of that planning comes down to keeping her involved."