For many people struggling with disabilities, managing daily tasks requires perseverance, energy and strength of character. As a result, many people with disabilities put planning for the future on the back burner as they focus on their immediate needs. But while this lack of forethought may seem effective in the present, it can have deleterious results both in the long run and in the present. It is estimated that 32 percent of disabled Americans are living below the poverty level, and this number will continue to rise if disabled people and their caretakers do not plan their finances properly. Although every disabled person has different physical and financial needs, the personal finance guide for people with disabilities below will bring to light critical issues that are relevant to those caring for themselves or a disabled loved one.
The first step in creating a reasonable financial plan, both for disabled people and healthy people, is evaluating both future and present monetary needs of the disabled person. It goes without saying that the key to establishing and maintaining financial stability is to have a realistic understanding of both income and expenses.
Both disabled people and their caretakers will need to consider several difficult questions, including:
Once you've taken a good look at the financial obligations and income streams available to the disabled person, you can begin to search for sources of supplemental income and ways to reduce expenses without depriving the disabled person of critical services.
A helpful way to maximize all of the resources available to a disabled person is to set up a special needs trust. Set up by a professional manager of special needs trusts and administered by a corporate trustee, can serve as the cornerstone for a disabled person's long-term financial stability. When established properly, a special needs trust takes into account the disabled person's income, property ownership and long-term financial needs so that the disabled person's finances will be balanced over time. Knowledgeable managers of special needs funds can also counsel their clients about any government benefits or sources of income that they may be missing out on. Once the fund is established, the trustee will oversee the allocation of funds so that the disabled person can live as financially comfortably as possible.
Special needs trusts can be funded either by the disabled person or by his or her family member. Legally, all special needs trusts that are funded by the disabled person must provide for reimbursement of Medicaid upon the death of the disabled person. Only after this payback is complete can estate beneficiaries lay claim to the deceased's assets. In contrast, special needs trusts funded by family members ("third party special needs trusts") are not subject to the Medicaid payback outlined above. For this reason alone, many financial advisors recommend establishing third party special needs trusts.
Finally, it should be noted that special needs trusts must be established before the disabled person reaches 65 years of age, and the beneficiary of the special needs trust must be considered disabled within the meaning of the Social Security Act - specifically, he or she must not be able to sustain gainful activity as a result of the disability.
The United States government has several programs set up to help provide financial security for those who are disabled and those who are in low income brackets. Because many disabled people fall into both of these categories, they are often entitled to several types of benefits. Although a full explanation of all government benefits for disabled people is beyond the scope of this personal finance guide, it is worth highlighting some government programs geared specifically for disabled people and their families.
Supplemental Security Income is a program run by the federal government that is financed through taxes and is aimed at helping disabled people with little or no income afford basic needs such as food and housing. In 2012, for example, the maximum SSI benefit for an ndividual is $698 per month, and $1048 per eligible couple. Unlike Social Security benefits which are available to all people over the age of 65 who have paid into the system, SSI does not require the recipients to have contributed in any way in order to be eligible. As a result, over 4 million disabled adults claim SSI benefits annually. Critics of the SSI system complain that these benefits will not be enough to sustain a disabled person entirely, but supporters claim correctly that SSI benefits do help many disabled people meet their monthly expenses, a goal which would otherwise be unattainable.
In order to be eligible for SSI benefits, one's disability must prevent him or her from earning more than $1010 per month, and the disability must be confirmed to interfere with regular work activities. There are some disabilities that automatically qualify a person for SSI, as they are widely recognized for their severity. These include chronic liver disease, loss of visual acuity or efficiency, mental retardation, personality disorders and dozens of other disabilities. Children may be eligible to receive SSI benefits and their parents should apply on their child's behalf. Adults who become disabled later in life should apply for SSI immediately in order to begin receiving these benefits.
Commonly confused with SSI, Social Security Disability Insurance is a program that is financed with Social Security taxes paid by employers and workers. SSDI is available only to disabled individuals who have worked long enough and have earned enough credits to be considered eligible for Social Security benefits. Additionally, SSDI eligibility is subject to very specific definitions of disability which are evaluated on a case-by-case basis. Among the criteria for eligibility, SSDI applicants must have a recognized long-term disability. Applicants with short-term or partial disabilities will not be granted SSDI benefits. Likewise, the disability must be classified as severe, such that it impairs the applicant's ability to walk, sit or remember basic information.
It is worth noting, however, that family members of eligible applicants may also be eligible to receive SSDI benefits on their relative's behalf. Family members who may be eligible for SSDI benefits include children, spouses and divorced spouses, who can receive up to 50 percent of the disabled person's disability rate. Familial applicants for SSDI are also evaluated on a case-by-case basis.
Finally, it is worth mentioning that disabled people should pursue all possible streams of income beyond government-sponsored programs in order to ensure their financial stability. Depending on the needs and abilities of the disabled person there are a myriad of opportunities waiting to be discovered. Below are some suggestions for ways in which disabled people can search for feasible means of income.
Disabled people who are able to work, even part time may have better luck starting their own business than looking for flexible employment opportunities. Although there are no government grants to help disabled people start a business, there are many low-interest loan programs that can help disabled people start a business without incurring unmanageable expenses. The Maryland WorkABILITY Loan Program, for example, offers $500 to $5000 loans to people with disabilities. The Iowa Target Small Business Assistance Program offers similar loans to disabled entrepreneurs. Disabled people looking to start their own business should carefully research what loans are available in their state or region to see if they can defray the startup costs of opening a business and repay them when possible.
Disabled people who are functional enough to pursue an education may have a difficult time paying today's high college tuitions. To help defray these costs, hundreds of scholarships for disabled students have been established. In addition to private scholarships and grants offered by non-profit organizations, many universities and colleges also offer special scholarships reserved for people with disabilities.
Qualifying for tuition subsidies or scholarships as a disabled person is quite different than qualifying for other disability benefits such as SSI. There are scholarships for autistic students, those with blindness or low vision, tuition subsidies for those with hearing impairments, lupus, wheelchair users and disabled veterans, among other things. Disabled people interested in pursuing a higher education should consult with an academic advisor or with a counselor at the school of their choice to determine what options may be available in their specific situation.