Assistance for elderly parents of disabled children through specialized trust funds offers tranquility and security.
Trevor, 75, and Emily, 36, dwell in the ground-level unit of a house situated near San Francisco's Golden Gate Park. Trevor's grandson and his family reside in an independent unit upstairs. Upon the family's demise, Emily will acquire her property share of the house through a special needs trust, a provision established by the Trevors in 1997.
Obtaining the house unconditionally could result in Emily losing the financial assistance she relies on due to her disability, rendering her incapable of working.
"Housing issues pose a significant challenge because we're eventually gone, and who'll then manage this responsibility?" Trevor pondered. "It's a complex scenario, and it all falls upon the parents."
Undeniably, countless parents caring for disabled adult children belong to the older demographic, grappling with their own mobility challenges. By 2050, the U.S. elderly population will swell by approximately 50%, as per estimates by the Population Reference Bureau.
Simultaneously, people with disabilities continue living longer and aging in place instead of institutions, as per health experts like David Goldfarb, a disability policy director at The Arc, an advocacy group.
"Fifty years ago, few anticipated that many people with disabilities would survive for long," Goldfarb elaborated. "Fortunately, they now live longer thanks to medical advancements and improved public health. However, the required support and resources have yet to catch up."
This predicament often leads families to a state of crisis when searching for suitable in-home or long-term care for multiple disabled relatives. Consequently, many families are seeking advice from advocates and attorneys to better prepare for the longevity of their loved ones.
"They're aiming to mend the gaps following their departure because no one can match the services offered by parents," stated Mercy Hall, a San Francisco-based attorney with the Hall Law Firm, which specializes in disability planning.
A commonly favored solution is a special needs trust, or SNT.
Dividing resources among disabled individuals, as per Supplemental Security Income and most state Medicaid thresholds, requires them to maintain bank accounts holding less than $2,000 and own no assets exceeding this limit, with discretions such as a principal residence or single vehicle. However, additional property may not be held under the disabled individual’s name.
An SNT bypasses these financial limitations by transferring assets to a trustee, who legally promises to utilize the funds to exclusively benefit the disabled individual, named the "beneficiary." Decisions are made based on a letter of intent crafted at the trust's formation.
Increasingly, attorneys confirm the surge in demand for such trusts.
"I firmly believe these trusts are becoming increasingly crucial due to the system's instability," shared attorney Stephen Dale with The Dale Law Firm based in Pacheco, California, which focuses on estate planning for families with disabilities. The array of trust options available can provide not only financial security but also guidance to navigate the tumultuous realm of government-subsidized care.
Parents often become well-versed in the intricate web of social services bureaucracy.
Following a career as a graphic artist, Trevor exploited his experience while caring for Emily by securing an administrative role with the organization Support for Families of Children with Disabilities, a common shift made by professionals in the disability community who are themselves parents of disabled children.
"Many of us are naturally drawn to this work because we want to aid other parents," shared Trevor.
Amy Tessler likewise charted the same path. After three decades as an industrial engineer, she transitioned into the role of education and outreach coordinator for The Dale Law Firm - the same firm that constructed an SNT for her son, Scott, who is 28 and diagnosed with autism.
At age 66, Tessler embraced this role to strengthen her commitment to the disability community. Beside enriching her understanding of the SNT, she also learned how to choose the proper team to execute the trust following her and her husband's incapacitation.
"Having a document doesn't automatically secure your child's future care," stated Tessler. "Selecting the right team to manage the special needs trust is of utmost importance."
Tessler appointed a fiduciary - the professional responsible for managing the finances of the beneficiary - accompanied by an internal care management team, capable of both financial administration and caregiving upon Tessler and her husband's inability to provide support.
"Plenty of professional fiduciaries exist," Tessler explained. "But I could only find the one that could cater to my specific needs."
Tessler's fiduciaries, Jewish Family and Children's Services, have been interacting with Scott at least twice yearly.
"They were eager to establish a relationship with my son and me, as well as the rest of my family," shared Tessler.
Scott currently resides at Sunflower Hill, a California-based community for adults with disabilities.
He boasts a bustling schedule, Tessler said, filled with an adult day program, assorted interests, and various activities such as the Special Olympics, yoga classes, hiking clubs, karaoke nights, culinary classes, and weekly communal dining events.
Fortuitously, Scott secured the apartment a few years back by chance when a friend of his won a lottery.
At the moment, he journeys back to Oakland on weekends but intends to reside permanently at Sunflower Hill full time in the future.
Due to his parents, Sunflower Hill, and government aid, Scott enjoys a robust support system. The Special Needs Trust (SNT) is put in place to cover any unmet necessities and improve his lifestyle post his parents' demise. It can also aid Scott during periods of transition, such as changes in public assistance or housing.
"We can't guarantee that his current situation will remain consistent throughout his life," mentioned Tessler.
She revamps the trust's planning documents every half a year to reflect Scott's latest developments.
"In many ways, the trust serves as an extension of the parent," explained Dale. "A well-structured trust focuses on more than just public aid."
Overcoming obstacles
Choosing the right trustee is crucial.
"You're surrendering your funds," stated Goldfarb, an expert at The Arc. He advises families to inquire if the entity responsible for managing the funds conducts financial audits and has an autonomous board.
It's typically family members, such as a sibling, who are appointed as the trustee rather than professionals. However, assigning a sibling as the financial guardian might result in an uneasy situation, warned Hall, an attorney in San Francisco. And while a reliable friend may display immense kindness, they may not possess the necessary skills for the job.
"It's preferable to allow siblings to remain siblings, and not bestow upon them the role of gatekeeper to the funds," suggested Hall. "You might encounter someone with an enormous goodness within their heart, yet they may not excel in financial management."
Families often become embroiled in court disputes over the SNT.
To circumvent this, Dale recommends designating a family member as the trust protector instead of the trustee. A trust protector possesses the power to displace and replace a trustee if necessary.
Managing your financial manager
Sabrina Padillo serves as a social worker and case coordinator for Rehabilitation Care Coordination in San Diego. Her responsibilities involve looking after the well-being of residents as per the guidelines in their trust documents.
Padillo interacts with some clients frequently, while others encounter her yearly, to coordinate medical care and public assistance. Sometimes she assists clients during significant life transitions. For example, she's facilitated clients' relocations to Thailand and evicted squatters from their property.
"Their duty is to manage the finances," said Padillo of fiduciaries. "Our role is to manage the individual."
Inadequate competence might cause fiduciaries to prioritize financial considerations over requirements, such as purchasing a two-story property for someone with mobility issues or an SUV in lieu of a wheelchair-accessible van.
Families, according to Padillo, frequently misunderstand the constraints of an SNT.
"We're not arranging an entire family vacation to Disneyland," Padillo emphasized.
Which trust should I opt for?
The Tungs and Tesslers established third-party SNTs for Rachel and Scott. Establishing third-party trusts before they're required and funding them by someone other than the disabled individual, such as parents, family, or acquaintances, is typical.
The decision to establish a trust usually occurs at around eighteen, when many individuals with disabilities become eligible for Supplemental Security Income and Medicaid for the first time. This marks the initiation of what's known as the transition phase, during which families begin to depart from the educational system.
Setting up a third-party trust can take several weeks or months, contingent upon various elements.
However, SNTs can also be established swiftly, as first-party trusts, to store money from medical malpractice lawsuit settlements.
A first-party trust can be funded directly by the disabled individual, although it comes with stringent limitations and is typically subject to Medicaid repayment after the beneficiary's demise. This implies that the state can claim any remaining funds in the first-party trust equal to the amount Medicaid expended on the disabled individual's behalf.
"I've had clients in their eighties, with no assets left due to the passing of their child," pointed out Hall.
The Urbatsch Law Firm in Berkeley, specializing in special needs estate planning, charges a flat fee covering a broad range, from $5,000 to $8,000, to establish a trust. Experts in SNTs caution against opting for low-cost trusts with non-specialized lawyers who might not customize trust documents for specific cases or have the means to connect families with resources in the disability community.
For families with a relatively small amount of savings, typically under $60,000, pooled trusts might prove an attractive alternative. These SNTs have lower initiation costs and are managed by nonprofit organizations. They can be either first- or third-party trusts.
The Golden State Pooled Trust, run by The Dale Law Firm, has an initial fee of around $1,500.
"I personally believe pooled trusts are the future," said Dale, who is also the president of the Alliance of Pooled Trusts — an organization that defines best practices within the industry.
Dale underscored that these trusts aren't solely for low-income individuals but for anyone desiring to leverage the resources of the pooled trust nonprofit.
A person can store up to $100,000 without affecting their public benefits, according to Alisa Ferguson, program manager of Virginia's ABLEnow. This year's annual contribution limit is set at $18,000.
"Our main goal is to educate people about finance," Ferguson shared. "These are individuals who haven't had the opportunity to save money."
Without ABLE, individuals receiving benefits often spend down their accounts to stay below the $2,000 limit. Ferguson referred to this as "spending it down". This usually involves purchasing non-essential items such as shoes, televisions, and unnecessary items.
ABLE Accounts offer more flexibility than Special Needs Trusts (SNTs). Virginia's program includes a debit card, allowing for everyday expenses like dining, pharmacy visits, and clothing. Some programs even allow for investment opportunities.
SNTs can be used to fund ABLE accounts. However, just like first-party SNTs, ABLE accounts may be subject to Medicaid payback after the individual's death.
Rachel's Future
Linda Tung manages Rachel's finances. Upon Tung's passing, her son will take over as Rachel's SNT trustee.
In 2010, Tung assumed additional responsibilities, caring for Rachel after her husband's passing. Rachel also aged out of school that same year and started attending The Arc of San Francisco.
Housing and care are two concerns for Rachel's future. Tung placed Rachel on two supportive housing waitlists last year but anticipates a five-year wait for a spot. Both Rachel and her mother hope to transition sooner.
Rachel is social, independent, and enjoys her independence. "I missed camp," she said after coming home from a 10-year summer camp in the Santa Cruz Mountains, fighting back tears.
San Francisco's arts and culture resonate with Rachel and Tung. Art pieces created by mother, daughter, and friends adorn their home, with Tung frequently visiting the Legion of Honor and de Young museums. Rachel prefers the Academy of Sciences and participates in an art program run by The Arc, where she recently met her boyfriend.
Her living room is filled with Rachel's smiley face drawings made with markers, while her studio work includes a large acrylic painting. She's also sold a painting at a local exhibit on Castro Street previously.
The SNT is a crucial part of Tung's plan, ensuring Rachel continues enjoying her activities and securing her independence.
"You don't want your child to be 40 and you, 80, and suddenly they're not in their own home, surrounded by strangers," Tung shared. "We don't want that to happen."
Reporter: Hannah Frances Johansson and Photographer: Amin Muhammad work with the Investigative Reporting Program at the University of California, Berkeley's Graduate School of Journalism. They covered this story through a grant from The SCAN Foundation.
"Emily's wellness and ability to maintain her disability benefits are paramount in selecting a trustee for her share of the house," Tessler asserted. "Sustainable housing solutions are crucial for people with disabilities, as per a 2050 U.S. elderly population estimate by the Population Reference Bureau."
