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Special Needs Plan Do-It-Yourself Disaster


Special Needs Planning Mistakes
Quick case study on how Do-It-Yourself Special Needs Planning can potentially lead to disaster

In every presentation and conversation regarding special needs planning there is always one piece of advice that we provide: DO NOT attempt to do-it-yourself (DIY).  Special Needs Planning is a complex and constantly changing practice area – despite best intentions it is very easy for a parent or guardian to make mistakes because they don’t have the right information or resources.


              If you doubt me consider this story from today – anecdotal yes but a prime example of why DIY is a bad idea.  My conversation was with a special needs mom who attended one of our seminars.  She was considering the creation of a special needs trust and wanted to know the main differences between an SNT and a 529 ABLE account.


              No sweat, happy to opine.  I started talking about the 529 ABLE and how great it was for managing smaller funding amounts – specifically up to the $100,000 threshold that is not considered when determining government benefit eligibility.  I couldn’t finish the sentence before the mom replied: “that’s not accurate, the limit is $400,000, not $100,000; they changed it for 2024.”


              On my side of the phone the resulting pause seemed like it lasted for an hour although I’m sure it was only about 5 seconds.  “No ma’am, that is not the benefits threshold; $400,000 is the maximum amount the account can hold in some states.  Anything over $100,000 will count against benefit eligibility.  Have you already deposited more than that in the account?”


              Suffice to say that this was the start of a disagreement that would not be resolved with a brief phone call.  Mom doubled down on her belief and was convinced I was incorrect.  I politely disentangled myself – this wasn’t someone I was actively engaged with, really just a follow up call to a seminar – and made a note to touch base in a few weeks.


              Reaction aside this interaction highlighted our position: DIY is a terrible idea.  I don’t know if mom deposited more than $100,000 into her ABLE account, but she clearly thought she should.  That excess funding represents a huge problem – it will likely restrict her child from receiving SSI and/or Medicaid until it is spent down.  This means thousands, tens of thousands, or even hundreds of thousands of dollars they could have saved elsewhere for their child’s care is now gone.  And likely a longer benefits approval process to boot.


              Here is the good news: she will realize her mistake now that she’s heard the correct information.  Regardless of her certainty, she’s looking to engage with a planner which means this issue will be identified and corrected.  The alternative would have been disastrous.  We tell clients all the time – you only get one chance to do special needs planning correctly; in most cases if a mistake is made you won’t be around to fix it.  That is why it’s so critical to engage with professionals and not leave your DIY solution to chance. 

 

Moors & Cabot, Inc - Johnson Cotroneo Group

999 Vanderbilt Beach Rd. Suite 102

Naples FL, 34108

239-449-7982, 239-449-7992


Investment Advisory Services provided by Johnson Cotroneo Group are through Moors and Cabot, Inc., an SEC-registered investment advisor.


Brokerage services and investment products offered through affiliated broker-dealer Moors and Cabot, Inc., Member FINRA, SIPC

 

Moors & Cabot does not provide tax advice; please consult with a tax professional.

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