The Wall Street Journal has a story about a financial adviser Michael Duckworth, who helps affluent clients who have disabled family members. In one case, he found that the clients' existing plans would exclude their autistic daughter from adult programs.
The reason: The very best programs in her community were only available to people on Medicaid. To qualify for Medicaid, an individual's assets cannot exceed $2,000. Yet the family's outside advisers had put together a financial strategy that, while perfectly suitable for a typical family, would permanently put the girl's income over that limit and thereby effectively eject her from the public system.
"Advisers who don't practice in this area can inadvertently create extraordinary problems that they just can't see," explains Mr. Duckworth, who leads a private-banking team that manages $550 million on a fee basis for about 80 clients with net worths of between $10 million and $50 million.
The potential cost to the girl's quality of life was incalculable. "Fifty, 60 or 70 years of access to the best programs were about ready to evaporate as an option," says Mr. Duckworth.
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Special-needs trusts are designed for severely disabled individuals who can demonstrate that they need to qualify for medical assistance, but whose income and assets exceed eligibility requirements. The terms typically allow the person to qualify for Medicaid and use the assets of the trust for all of their supplemental needs specific to their disability.
Anyone can set up a special-needs trust for a severely disabled family member. But to insert special-needs language into this girl's existing trust, her family would need to convince a judge that receiving Medicaid was critical for her quality of life.
So on Mr. Duckworth's advice, the family enlisted a lawyer who succeeded in making the case to the courts that the girl needed Medicaid in order access the best assisted-living, adult-daycare and occupational-therapy programs in her community. As part of the condition of this new language, Medicaid will keep a running tab on the girl's use of Medicaid over the course of her lifetime. When she dies, the trust must pay back the cost of those benefits to the government.
