Special Needs Planning: Giving Strategies for a Person with a Disability

By Vivian J. Villers, CFP®, AIF®, CWS®

As we approach the holidays, I thought it would be helpful to review some gifting ideas for people with disabilities. Most adult children with a disability (DAC) are receiving government benefits that restrict the amount of cash they can own. Some of them, such as my nephew Stephen, are living in a facility.

An individual living in a group home or institution can only keep a small portion of their monthly SSI, typically $30 to $60. Those funds are not enough to provide just a few extras each month. Even if the individual is living at home, the parents may be struggling financially with out-of-pocket costs for care.

Family members – grandparents, parent, aunts & uncles, siblings, even family friends – can provide useful gifts for the person with a disability without handing them cash. Here are some immediate, long-term, and inheritance gift ideas.

IMMEDIATE

  • Gift certificates from the local barber or hair salon, pizza or fast-food restaurants, Uber, Lyft or local taxi company would all be great.
  • Adding that person’s monthly cost for cell phone or internet service to your own account.
  • Coupons for the local movie theater or bowling alley.
  • Items such as clothing, a basket of favorite non-perishable snacks (think popcorn, candy, chips, etc.) are always appreciated. Do check to be sure these food items are not prohibited due to special diet restrictions.

LONG-TERM

There are many ways that family and friends can make a gift that can provide funds to supplement resources available for the longer term.

  • Open or deposit cash to an existing ABLE account. This account can be owned outright by the person with a disability. The maximum contribution per year by all individuals combined is $15,000, but don’t allow the total balance to exceed $100,000.
  • Adding to the Special Needs Trust. Grandparents or other family members can contribute cash or investment assets into a Special Needs Trust. Be careful that the investments are NOT highly appreciated or there could be large capital gains taxed at the trust tax rate when sold.

LEGACY OR INHERITANCE

Family members can name the Special Needs Trust as a beneficiary at their death. Be sure to have the exact wording for the trust in the beneficiary instructions. Here are some typical strategies:

  • Life insurance proceeds going directly to the Special Needs Trust either as a partial or total named beneficiary.
  • Investment assets – either highly appreciated or not. Under current tax law, there would be a step-up in the cost basis of the assets bequeathed into the Special Needs Trust. Assets could then be sold for little or no tax consequence.
  • IRAs – Either inherited as a beneficiary IRA inside the Special Needs Trust or liquidated and proceeds deposited to the Special Needs Trust.

I hope these gifting strategies are a useful guide. Happy Holidays!

Vivian J. Villers is a long-time Sigma Financial representative. For over 20 years, she has provided financial planning advice for families and individuals with special needs. Vivian serves on the Board of Directors of The Arc of Illinois and has two family members with disabilities. She is a recognized authority on special needs financial planning and frequently speaks on the topic to both families and professionals.

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