Julie Rogers worries about being able to financially provide for her 7-year-old disabled grandson, Eric Pierce, especially after he reaches adulthood.
As the boy’s primary caregiver, Rogers, 57, frets about Eric’s ability to have ongoing access to expensive equipment and therapy after she is gone.
“I’m not going to be able to protect him. No matter how much I do for him, he is always going to be disabled,” Rogers said.
Motivated to find a solution, Rogers met with an attorney and learned
about developing a special needs trust for Eric and the associated financial planning necessary to keep his trust money secure and growing.
Her attorney referred her to Scott MacDonald, Managing Director for Merrill Lynch and head of the Special Needs Team, a group of specialists ready to help manage Eric’s financial future.
MacDonald, a 30-year Merrill Lynch veteran, developed a team of six advisors and five support staff that services special needs clients throughout the western United States.
The team’s clients are people unable to care for themselves either because of an accident or because of a physical or mental disability.
“We’ve been blessed to move from a Wall Street casino situation. When we first started it was about money and the big Wall Street thing,” MacDonald said. “There was no meaning in that, so we sought with financial planning to make a difference for people who really need it.”
Navigating the financial labyrinth for disabled clients is tricky, and MacDonald and his Special Needs Team must operate within a very narrow planning parameter.
“Clients like these have complicated needs and can’t go back to work. They are not able to be employed so we have to preserve their public benefits in the process,” he said.
Without a special needs trust in place, disabled people that inherit money or receive an injury settlement must pay the state back for any benefits already received and must spend the remaining money, if any, down to $2,000 before again receiving public benefits such as Medi-Cal or SSI.
“Title of your retirement accounts for families and wills and where it goes to a disabled person is crucial in retaining that money for your family’s benefit,” MacDonald said. “A special needs trust is designed to preserve the public benefits future or past.”
To ensure that a special needs trust and its management are developed properly, MacDonald recommends that clients employ a group of specialized professionals as opposed to generalists. Working with attorneys, caregivers, accountants, financial advisors and benefits counselors well-versed and trained in all aspects of special needs is essential.
“It needs to be done right, with the right professional team, that does the job for the client, specifically,” MacDonald said.
Merrill Lynch’s Special Needs Team begins their work by conducting a comprehensive financial plan, extending through the disabled client’s expected life span. The goal is to determine how to invest the trust’s money and best provide for the needs of the client with the least amount of risk possible.
The challenge is to ensure that clients do not run out of money, that their budgets fit their needs and that they have prudent investments, all while complying with state regulations.
Families need to understand just how much money they should save and invest to meet the lifetime needs of a disabled family member.
“One resource is the special needs calculator. It’s a generic resource that I helped develop that you can access online,” MacDonald said.
Once a budget and plan have been developed, the Merrill Lynch Special Needs Team advises families on the available financial instruments they can employ to meet their financial plan. There are a variety of options including the ABLE account, a Roth-like IRA for the disabled, insurance policies and securities, all titled to the trust.
“Generally, for clients that don’t have a lot of money, insurance is the solution,” MacDonald said. “They can pay for insurance on both parents, and when the second parent is gone, it will fund a special needs trust for $1 million or $2 million of tax free money that will pay for the ongoing needs of the client.”
The process of protecting a disabled person’s financial future is typically confusing and overwhelming.
“They are constantly advocating for their family member, and they are caught up in a whole forest-versus-trees situation where it’s really hard for them to get clarity on where to go for advice,” MacDonald said.
Rogers was relieved to gain MacDonald’s and his Special Needs Team’s guidance, and she isn’t as worried about Eric’s future as she once was.
“In the special needs trust end, they’re very conservative and they’re here to protect the children. I figured that out within about 10 minutes of being in [MacDonald’s] office,” she said. “I could tell he was very, very protective because families do come in and try to manipulate the money, and this is all for Eric and no one else.”