Friday, July 12, 2024

Episode #99: Secure Their Future: Financial Planning for Special Needs Kids

Wondering how your child with a disability will be financially secure? This interview reveals 3 life-changing steps! Jim Lange, a CPA and attorney, shares key strategies to secure their future. He emphasizes the importance of government benefits...
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3 Critical Steps in Financial Planning for Special Needs Kids!

Show Notes:

Wondering how your child with a disability will be financially secure? This interview reveals 3 life-changing steps!

This interview dives into the world of financial planning for children with disabilities. Jim, a financial advisor, shares key strategies to secure their future. He emphasizes the importance of government benefits like SSI and SSDI, along with estate planning and Roth IRA conversions.

Throughout the conversation, Jim highlights a crucial mindset shift – it’s all about the child’s well-being, ensuring they have the resources for a fulfilling life. He warns against inaction, emphasizing that there are resources available to navigate this process.

The interview concludes with a discussion about Jim’s book and summit. While their contact information won’t be directly mentioned in the video, listeners who want to learn more can find them through these channels after reviewing the interview.

This video is a valuable resource for parents and caregivers of children with disabilities, offering practical steps and a reminder to prioritize their child’s future financial security.

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Music Used:

“LazyDay” by Audionautix is licensed under a Creative Commons Attribution 4.0 license.


James Lange is a CPA/Attorney and the author of ten financial books that help IRA and retirement plan owners. The Wall Street Journal has endorsed Jim’s tax and estate planning strategies 36 times.

Jim’s daughter, Erica, has a disability. Jim’s Roth IRA conversion and SECURE Act expertise was critical in developing a solution for his daughter, and then extrapolating his solution for the benefit of all parents of a child with a disability. Jim authored a new book, Retire Secure for Parents of a Child with a Disability, with two experts in the disability field. The financial planning solutions Jim developed and is sharing with other parents of a child with a disability in this book came from his own family’s journey to devise a long-term financial security solution for Erica.

Episode #99: Secure Their Future: Financial Planning for Special Needs Kids

Wondering how your child with a disability will be financially secure? This interview reveals 3 life-changing steps!

(Recorded May 22, 2024)

Full Transcript of Interview:

Tonya: Jim, welcome to Water Prairie.

Jim: Well, thank you so much for having me, Tonya.

You and I have talked a little bit via email and through, through some, some of your team about the topic that we’re going to talk about. And I’ve been looking forward to this one. My husband’s been excited about it as well. We’re looking forward to being able to share your information with, with our audience to start out. Let’s, let’s go back a little bit. I’d like to hear kind of what led you to looking for ways to help special needs parents provide for their children’s future.

Well, it’s interesting. You know, a lot of people become involved in situations related to some type of problem with their child. So my background is I’m a CPA and a state attorney. I’ve been doing this for 35 years. I have nine best-selling books. I’ve been in the Wall Street Journal 36 times. And my real area of expertise is I’m planning for people who have IRAs, Roth IRA conversions.

estate planning, the Secure Act, and then more recently, providing for a child with a disability, and when I had to come up with a solution for my own daughter, which my wife and I did, and the difference is The difference between her running out of money and having $1.9 million in today’s dollars. I wanted to just tell the world about it. I wanted to say, hey, hey, community of parents with a child with a disability. There is a way. That can enormously alleviate your worry and your anxiety because you’re not only going to have to provide or hopefully provide for your child during your lifetime, but then after you’re gone, you know, my daughter might survive me by 40 years.

How do we provide for her for 40 years after I’m gone and working longer, spending less and saving more just doesn’t do it. So I have this, what I think is wonderful information. I was able to. Recruit two wonderful coauthors and we wrote a book called Retire Secure for Parents with a Child with a Disability and and then we’re doing a summit on it and right now it’s my life goal to get this information out to as many people as possible.

As could use it as possible. We’re making the book available for free. We’re picking the summit available for free. And if people go to a website, you know, they can again, get this all for free. Uh, this is, this is me and my daughter and. My wife,

just a note, listeners, we’re going to talk more in detail about the book and about the summit, um, near the end. So stay with us to the end of this, but go ahead and look in the show notes in the description and you’ll see the links there as well. So make a note of that and remember to come back and click on those links.

And thank you for doing that, Tonya.

Oh, sure, sure. The, you know, our whole idea is we’re trying to serve as much, as many people as we can by providing as much information as we can.

And the majority of our listeners are parents with children with different disabilities and special needs. So this is valuable information for all of them to listen to. And, um, But I, I kind of want to get into what, so, so we know how you got started. This is a personal passion for you. Um, as it is for a lot of us, as, as you say, can you tell us what steps you followed to ensure that your daughter would be provided for?

Sure. So there’s three basic steps that I think apply to just about everybody who has a child with a disability, who wants to dramatically improve. The prospects for that child, both while you’re alive and after you’re gone. And let me start by saying, if you have a child with a disability and your goal is to provide for them for your lifetime and their lifetime, unless you’re spectacularly rich, You have a long, tough job ahead of you.

So you want to maximize every single thing that you can. You want to squeeze the last dollar out of the tax code. You want to get every government benefit that you can. Um, so just keep that in mind. And the difference, you know, a lot of times when I’m working with, you know, Let’s say a client that doesn’t have, that nobody in the family has a disability, and let’s say with superb planning, maybe we save, uh, an extra $500,000, and if we kind of screw it up, instead of getting an extra $500,000, the family gets nothing, or they even owe money.

And, Is that a terrible thing? Sure it is. Is it tragic if it’s done and two able-bodied adults don’t get as much as they could have? It’s bad, but it’s not tragic. But what if you have a child with a disability? And the difference between you doing it right and you doing it wrong is $500,000. And it’s not all that hard to find $500,000, depending on how much money you are, that is tragic because a little bit of money goes a long way, um, for a child with a disability, if you’re starting at zero. Now, there are many, many things are very expensive and we’re going to talk about government benefits, but we want to squeeze every single dollar, every single benefit that we can for the benefit of our child. And most of the work that I and the coauthors do is basically in one form or another, get money from whether it’s the Social Security Administration, whether it’s the, you know, the IRS or the federal government to, let’s say, transfer, usually gradually on a monthly basis or even annually, transfer money from the government resources to our child’s resources.

And that’s really the key. So there’s no magical investment. There’s no magical life insurance policy. Um, this is basically, let’s call it government program and tax reduction. I believe can make a huge difference for so many people. I’ll tell you the other immediate benefits of getting this work done after all three steps, and we’ve experienced it personally.

Cindy and I were really anxious. Oh my God, what are we going to do? Are kids going to run out of money? They’re going to be a ward of the state. They’re not going to be able to have any other resources. They’re not going to be able to have any luxuries. They’re not going to be able to see an out-of-town, out-of-network doctor.

They’re not going to be able to get the alternative drug that the, uh, that the, uh, insurance company isn’t covering, blah, blah, blah, blah, blah. And it weighed on us heavily. And then what happens afterwards? So this was. Anxiety for us. And then when I found out our daughter is very bright, she was very anxious about her own financial future.

And then when I, when I explained to her, you know, what we were doing and how we were, how she was going to be okay, the anxiety level for both us and her went way down and frankly, all of us have some physical issues, her more profound than, than ours, but anxiety exacerbates many of these symptoms. And for us, the reduction in anxiety did what you would expect, you know, better sleep, better feeling, blah, blah, blah. But for her, it made a dramatic difference in her health. So I think that that is achievable by getting these things done. So it’s, it’s not just a matter of, Oh, okay. 30 years after we’re gone, there’s going to be money instead of no money.

No, this is a, this is an immediate measurable benefit. Let’s do the three steps because they’re, they’re mission critical. And ideally, they’re done in this order, although you might be able to combine step two and three. Number one, mission critical. Can your child qualify for either SSI or SSDI? Now SSI is essentially a poverty program.

So your child can’t have money. And maybe that there’s some planning involved so that your plan, so that your child doesn’t have money when they make the application. And by the way, the Social Security Administration, they will take into consideration the parents resources. So if the parents have any type of estate or any type of income, there’s a very good chance you’re going to be over the limit and you’re not going to be able to qualify until that child turns 18.

So once the child turns 18, then the Social Security Administration looks at that child’s resources and not the parents, and that’s typically When, um, well, on behalf of the child, but the child, um, applies for SSI and without getting into the details, the other possibility is called SSDI, um, which is Social Security Disability Insurance, and that is, um, Um, it is preferable if you can qualify for that, but you need to have a work record.

Uh, either the child has to have a work record or the parents have to have a work record. And if we’re using the parent’s work record, the parents have to be of retirement age. So for example, our daughter is collecting SSDI because, um, my wife, um, then applied for Social Security for herself. And then.

SSDI based on my wife’s Earnings record, but, uh, and this isn’t my area of expertise. This is Debra McFadden’s area of expertise and she calls getting qualified for SSI or SSDI the golden ticket. Uh, and if you like, I’ll tell you some of the benefits. Of the golden ticket.

Sure. Sure. Cause I know a lot of our parents that are listening will end up filing.

First, first there’s a monthly benefit and I should know exactly how much it is. And I think it varies depending on number of things, but let’s just call it roughly. 800, 900 a month, and I would say that’s just the beginning of the benefits. The other benefit is if you qualify for SSI or SSDI, you’re going to automatically qualify for other benefits.

Um, it might be insurance. It might be, um, Medicare. Which is, our daughter is qualifying under state insurance and Medicare, which is huge, more than the 900 a month cash. Um, it could potentially qualify you for equipment, uh, for specialized computers, specialized walking aids, specialized wheelchairs, um, all types of things that frankly can be very expensive and getting this qualification is mission critical for people who will, uh, who do qualify. And, you know, there’s a whole art and there’s a whole strategy of getting, uh, children qualified. Now, sometimes, uh, the, the disability is not so severe. Uh, that the government will say, yes, you qualify.

Uh, in fact, the vast majority of the applications, uh, probably many of whom deserve to be qualified are routinely rejected. And um, so to oversimplify and Debbie would hate if she heard me say this, if your child can work, there’s a good chance that are not going to be able to qualify if they can’t work.

Then there’s a good chance that they will. Um, and I’m sure that she would not like that characterization, but I guess my point, I mean, we’ve had, we’ve had adult children with down syndrome that bag groceries at the grocery store, not qualify because they can work, but that’s maybe an extreme rejection.

It’s the government doesn’t hand over money easily. Um, which is one of the reasons why if you are going for this designation, you really want to get this application. Dot your I’s, cross your T’s. There’s a whole bunch of strategies. I’ll give you a couple of them and then I’ll refer you to the book. So we as parents, we naturally want to tell people what our child can do.

In fact, very frankly, before this call, you were starting to tell me about your child and your children and you were, you, you didn’t say, well, they can’t do this. They can’t do that. You said they can do this and they can do that. And that’s natural. That’s what we, as parents want to do. But when you’re qualifying for SSI and SSDI, we want to go a hundred percent in the opposite direction.

We want to make our kids look as bad as possible. Um, we want to just make it so that boy, they can, you know, they’re, they, they have a really, really tough time just doing the most basic things like getting dressed or doing anything. So here’s the example that, that Debbie McFadden. Yeah, so Debbie is the parent of two Paralympic champions, uh, Tatiana, who is a racer, wheelchair racer, and, um, uh, Hannah, who is a, an above-the-knee amputee.

And she is a world-class Paralympic rock climber. All right. So this, this woman is an athlete. Okay. You have to be really good to be in that rig. And there’s very little doubt in my mind that if you timed her going up a flight of steps and you time me or you, or even most people that she’s going to get up there faster on one leg.

Okay. But. When it came time to apply for benefits, did Debbie tell the people, Oh, by the way, my daughter, she’s like an Olympic champion. She can get up steps really quickly, faster than you or I could. No. She said, my daughter can’t go up steps the way other people can go up steps. She only has one leg that is functional.

Okay, so this is tough. This is tough. That’s not what a parent wants to say, but that’s one of the strategies, and there’s a lot of other strategies. You want it, and you want to have to paint this picture. Hey, this kid has problems. He or she will likely never be able to work, and, um, You know, there’s, there’s discussions in the book about, you know, letters from doctors again, and you can’t just say, ask the doctor, Hey, can you write this letter?

You have to tell the doctor more or less what needs to be in the letter and caregivers and teachers, and it’s, it’s a big deal, but over time, it can be worth hundreds of thousands of dollars, maybe a million dollars. To the child over their lifetime. So you really want to get this right. So I’m going to and if you have any questions on it, that’s great.

But I’ll just sum up and say step one is get your kid qualified for SSI or SSDI. And more information is available in the book. More information will be available at our free virtual summit.

Excellent. That’s, that’s very powerful. Just that information alone. And we’ve talked about some of this in past episodes, um, and especially the part about making sure that your child’s income level is low enough by the time they turn 18. Um, parents listening. This is also including, and correct me if I’m wrong, if you have a 529 plan for your child.

Interestingly, you brought up 529 plans. I was gonna talk about that later. Actually, I wasn’t gonna talk about 529 plans. I was gonna talk about something called the ABLE Plan.

I was gonna ask, I was gonna bring that up as well ’cause we, we did an episode on that .

And, and, and frankly, if, if your audience is familiar with a 529 plan. where you essentially make an after-tax contribution to a fund that grows income tax-free, assuming that at some point the appropriate beneficiary, usually your kid but not necessarily, takes that money out for qualifying educational uses, that the money and the growth comes out tax-free.

And sometimes what happens is people put money in a 529 plan before they realize the extent of their child’s disability. Maybe the child will never go to college. The money’s there. There is actually a mechanism of transferring money from that 529 to an ABLE account. ABLE is wonderful. It’s just kind of like a 529 plan, right?

Every new thing tastes like chicken, right? It’s, it’s very much like a 529 plan. You put after-tax dollars in, the money grows tax-free. When the money comes out where the child is using that money for a qualifying use, not only does the money come out tax-free, but the growth comes out tax-free. And the other wonderful thing about the ABLE Act is it can be used for some things that a typical special needs trust, and we’ll get into that later, cannot be used for.

So it is a good way to supplement. The child’s income and still maintain government benefits. So it’s a great thing.

So, but the dollar amounts are still limited on that, correct?

That’s, that’s the problem that it is not, it’s not a game changer. It’s a good thing. But it’s not the difference between your kid running out of money and your kid being fine.

It’s just one more arrow in your quiver or mixing that up. But anyway, it’s, it’s just one one strategy that isn’t mission critical. We’ll get to the ones that are, but it’s a good thing. And why not?

Right. And like I said, we’ve, we’ve mentioned these before. We haven’t gone into deep dives on them, but we have tried to at least help provide that as a resource of information for our parents that are listening, especially when their children are young.

Because, as you say, a lot of times you don’t know, my children were both at birth, given money to go into their college accounts. So before they were walking this earth, they, they had money in their account and that money was to grow to get them ready for college. But, you know, as we talked to other parents, if the children are not going to go to college one day, they may need to think differently as far as when they start using those funds.

And maybe they do go to college, but they want money for others and they get a scholarship and maybe they want money for other things. Should I go on to step two?

Yeah, let’s, let’s go ahead. Cause I want to kind of run through all three of these before we go into the other questions that I have.

All right. So step two, uh, easier said than done is get your state planning right. This is, this is also mission-critical. So I would tell any couple with a child, you should get your wills done. And let’s, let’s forget about the money for the moment. All right. If something should happen to you and your spouse or the co-parent of your child.

Who’s going to raise that child? Well, I want the person to raise that child to be the person that you want to raise the child. Not the person that some judge in his or her estimation should be the person who raises the child. Maybe it’s your mother. Maybe it’s your brother. Maybe it’s a friend. Maybe it is a community that you’re involved with.

I don’t know. But here’s what I would think. You’re better off making that choice and doing it now. And by the way, if, if you know, so I was talking to somebody yesterday and she has a 75 year old mom and she says, you know, boy, my son is young. I, you know, my mom, isn’t going to survive to take care of him long enough.

Wait, Grandma lives with the son. She knows the son’s issues better than anybody. Name her, and then maybe come up with a successor, or even have her come up with a successor. Don’t let that be an excuse to put this off. You want to get your wills and your trust done right. So I just told you some of the non-financial part, as well as power of attorney and healthcare power of attorney, which is also mission critical.

Now let’s go to the money. Money. Let’s assume for discussion’s sake that your child, um, either now or even potentially later on qualifies for SSI or SSDI. In that case, and particularly with SSI, you lose your qualification for SSI if you have money. Well, gee, Jim, why don’t we just leave the money to our kid in a trust?

Okay, so let’s say that you do a standard minor’s trust or even a trust that will last the life of the child. And let’s say it’s a more or less, let’s call it a standard creditor’s trust. The IRS will look right through that trust. They will treat that money as if it’s the kid’s. They will cut off the kid’s benefit and maybe even try to get some money out of that trust for money that they have already paid.

So that would be a total disaster. So even if you have wills and have a standard trust, boom, you can lose that money and even have to pay money back. And that would be a horrendous thing. Remember, we’re trying to provide for this child for the rest of their life. No, you want something that is called a special needs trust.

And I won’t go into all the nitty gritty on that, but basically the trust is designed in a way that the social security administration and the IRS cannot go through that trust and treat it as if it is the kid’s money. So that money is protected for the benefit of the child. Now there are a bunch of restrictions on that, on the, you, what you’re allowed to do with that money, and I’ll be more specific, what the trustee is allowed to use that money for, for the benefit.

of the child. But the key is, is you want to get that trust. You want to get it right. If the underlying asset is an IRA or a 401k, there’s four additional things that you have to worry about. But if you do this all right, then you’re going to have a trust that can, you can leave an IRA to, you can leave a Roth IRA to, you can leave after-tax dollars to, you can leave your house to, and if, if the, T’s are crossed and the I’s are dotted and the child still maintains their SSI or SSDI status at your death.

That trust will be in place and the benefits will be protected. All right, so that, that is mission critical. Now I’m going to go to the advanced portion. All right, a lot of people, including us at one time, don’t really know how their kid is going to do Many years from now. So let’s say you’re in your forties or fifties or sixties, even, even seventies, you have an adult child and you hope that he’s going to be here.

She’s going to be able to get a job and be okay. You hope the best for your child, but you fear the worst. Well, and you, and you certainly don’t feel good about leaving the money outright to the child. So you have two choices. One, you can do, let’s call it the standard, uh, Predator protection trust. That the, that the trustee can use for the child with relatively liberal terms.

It protects them from, from the child himself from doing something stupid. It protects if the child ever gets married and the future ex sues them. It protects against other creditors, um, or maybe a hospital stay where it turns out there’s a $300,000 balance and well, gee, you know, I’m sorry. My money’s in a trust. So. It does. It does that.

All right. But the standard trust doesn’t protect government benefits. So, okay, well, we’ll do a government benefit, you know, type trust the special needs trust. Well, that’s going to be, let’s say that your child ends up not needing SSI not qualifying. And now we have this money in a very restrictive trust.

That isn’t the ideal place for the money. Okay. So, and, and let’s just say at the time of drafting, we’re not sure if our child is going to qualify for SSI or SSDI or whether they’re not. So here’s the advanced idea for this. It’s called a toggle trust, and it doesn’t work this way mechanically, but let’s just talk about it conceptually.

Think of two different trusts. One is, let’s call it the standard creditor’s protection trust that is pretty favorable for the child If they’re not getting a government benefit, the other one is, let’s call it this special needs trust, um, which is less favorable if the child doesn’t need or isn’t getting the benefit, but it’s very favorable if the child does need to benefit because it will protect the money in the trust and you basically let the trustee toggle Well, I need a creditor’s protection trust and you don’t make that decision now, but you make it after your, and maybe your spouse’s death.

And that way the trustee is going to know more than you do now. Cause right now, maybe your kids on SSI or SSDI, maybe they will fall off it. Maybe they’re not on it, but later they will qualify. So this just adds flexibility to the estate plan, and I am a big fan of adding flexibility to the estate plan.

I should tell you this is not a solicitation for legal services. I don’t have a law firm anymore. I sold it. But I still have this information, and I think it’s great information. I wanted to share it with your listeners. All right. So that’s, that’s the second thing is you want to get the estate plan right, the guardianship provisions, the powers of attorney, and the, let’s say, potentially the toggle, or if it’s clear, you know, a special needs or a protective trust.

So before we go on, I have a question about the toggle trust. So the trustee is the one that is. is deciding which way that’s going as, as time’s passing.

That’s correct. Which is typically, typically that decision will be made relatively shortly after the parent’s death.

Okay. So, so it’s, it’s happened at the point that it’s being implemented. It’s not five years from now they’re going to switch it the other way. They just have the decision at that time. It’s either going to go towards standard or special needs. Okay. Okay.

And, and I, again, I think that this is, I think it’s mission-critical to get this right.

Yeah. I had not heard of that before. So that’s, that’s an interesting…

Problem is hardly anybody’s heard of this before, including the estate attorneys.

So, listeners, now you know what to ask.

I’m creating a headache for you guys because some very good estate attorneys that work in this area have never heard of a title trust.

At least now our listeners know to ask for this.

Yeah, and then, and then I don’t know what to do, you know, when, when the attorney says, what? What’s a toggle trust? Um, but here, here’s what I would say. So, so I, I, I was a practicing estate attorney for 35 years. And I have my own ideas on what I think is the best estate plan. The other thing that I’ll tell you is when I review these plans, which is part of our work, when we do a master plan, I’m, I’m happy with maybe one out of 10 of the set of documents I see.

I almost always see major changes that I want to implement. All right. So that is what’s a, one of the problems. Uh, the other problem is, If somebody came to me and they said, well, I talked to Joe Schmo or I read this book and I’m interested in this provision in my will or in my trust, I tried to keep an open mind.

Hey, maybe I’ll learn something nine times out of 10 I liked my way of doing it better. Your state attorney might say, Hey, no, let’s just pick one or the other. And if we pick wrong, Okay. You know, we’ll just change it before you die. You’ll have to come in again. So, you know, and I don’t know, maybe somebody has a better argument against it than I do.

Um, but anyway, I will tell you that that’s going to be a practical problem. But what I would prefer is the attorney says, Oh, this sounds like an interesting idea. Maybe I can read up on it. And since I probably want you to go to a specialist anyway. Since I’m likely to see many more of these types of special needs or traditional with the toggle possibility, I want to get this thing right.

So then when the next person comes in, I can, you know, I can help that person. So I’m kind of getting, that’s kind of the advanced portion, but even just getting the basics right is absolutely mission critical.

Well, I can, I think I can speak for most of our listeners, especially as parents have had to learn how to advocate for their children.

So we’re giving them an assignment now to advocate for themselves whenever they go in. They know how to ask questions. They know how to try to help research. So I think we’re giving them some tools now that they can. Can take whenever they do have these, these meetings.

Well, I think that that’s what you, you and I are about Tonya. We are trying to give tools to a population that needs them more than most any other population.

Well, this is why I was so excited about this, this conversation, because I knew we’re going to be getting some.

It’s not all that hard to save a couple hundred thousand dollars. Uh, no, we haven’t got into my real area of expertise cause the first two are not. Should we go to the third part?

Yeah, let’s, let’s go into the third one. I want to, I want to hear this one now.

All right. So this is, this is really my area of expertise. So for the last, I did the first article. Peer review article. Um, and I wrote it 1997 even before Roth IRA conversions came into law in 1998.

And when they, even before it became law, I realized, wow, this thing is going to be unbelievable tax free growth for the rest of your life, the rest of your kid’s life, the rest of your grandkid’s life. And you know, when we’re number crunchers, so we said, okay, here’s if you don’t do any conversion. And your kid is going to be here.

Here’s if you convert this much for so many years, and I’m showing the end result. And here’s going to be where your kid is if you do the highest conversion. So we would run numbers. And determine, you know, using relatively conservative assumptions, where your kid will be, you know, not five years, 10 years, which is, let’s say, a relatively normal outlook, but 30 years, 40 years, even well after you’re gone.

So, in our daughter’s example, getting her qualified for SSI, forget about government benefits. All right. And getting the estate planning, right. She’s going to be better off by $1.9 million in today’s dollars because we proactively took these three steps. You know, that is, we got her qualified for SSDI, or we can SSI is similar for estate planning.

We got the estate plan right, and we got the Roth IRA conversions right, which started way back in 1998. And then I’ve done strategic Roth, 401k contributions, additional conversions, but we got the Roth right. And at the risk of being a little technical, back before 2020, if you died with an IRA or Roth IRA, and you left it to a non-spouse beneficiary, that non spouse beneficiary could stretch or defer.

Those distributions that many of us who are older than I’m not older than 73, um, yet, um, but you, those of us, those of you who are, you have a minimum required distribution, just like your kid will have a minimum required distribution after you’re gone. Well, in the old days, pre-2020, your kid got to stretch or defer those distributions of either an inherited Roth or an inherited traditional IRA over their life.

Then in 2020, government said, no, we’re sorry. We know that we said you could have the beneficiaries, beneficiaries stretched over their life, but we’re too greedy. We want the tax sooner. So now we’re only going to give your kid 10 years. And by the way. Even on a million-dollar bequest, that’s, that’s all.

If you count the interest over many years, that’s like a million-dollar difference. But guess what? They made an exception. If you’re an eligible designated beneficiary, which to oversimplify, means if you either qualify for SSI or SSDI and you maintain that qualification, the government is going to allow you, as you the beneficiary or the trust as the beneficiary for the benefit of the child, to stretch or defer those distributions over their entire life.

So. The, the difference in is very odd, even if you only have a $500,000 IRA, let’s say you have that a little bit more and not a heck of a lot else, your kid can be better off by $239,000 if you get the planning for the Roth IRA right. And by the way, you’re going to be better off too. So this isn’t, you know, this isn’t one of those where, you know, you, you eat rice and beans so your kid can be rich.

No, this is. This is not at your expense. In fact, towards the end of your life, you’ll actually have more money and more purchasing power if you get the Roth right, but, and a lot of people certainly have heard of Roth IRAs. And there’s a lot of advisors that Roth IRA analysis is part of what they do. And all the literature, at least that I’ve looked at, I don’t see the combination and the synergy of Roth IRA conversions and planning for a child with a disability. Now, are there a lot of other things that are related, like after tax dollars in a Roth, uh, converting, uh, uh, an inherited 401k to a Roth after death, um, separating the coffee from the cream, which in effect is to some extent a free Roth IRA conversion for your after-tax dollars, um, and then there’s a whole bunch of other, related strategies.

I’m just trying to give the big picture, but I’ll just say that there is often hundreds of thousands of dollars of getting this right. And even though the other two are absolutely mission-critical, and if you could only do two and only three, not three, then I would say, cut me and my Roth out, get the SSI and SSDI and the estate planning in. But anyway, mission-critical. Number one, SSI, SSDI. Number two, the estate planning right with the wills and the trusts and the beneficiary designation of the retirement plan and the special needs trust.

And number three is the tax planning right with Roth IRAs, ABLE, and then let’s say some of the subtle nuances in the tax law that frankly, I’ve been doing much of this for the last 25 years, that’s how long Roth conversions have been around. Huge opportunity. When I meet new, new people, new prospects, I hardly see anybody in the disability community who has got the Roth right.

And so I want to clarify, um, what you’re saying here to make sure, because if I’m following it, then our listeners are following it. And if I’m lost, our listeners may still be following it, but, but, but we’ll see here.

This isn’t easy stuff. It really isn’t.

My parents age, I know they’ve kind of had to make that payout time when things changed. So that was in 2020 that that changed.

Uh, that’s correct.

The required distribution started at that point, right?

In 2020, the big change was the rules for the beneficiary. So let’s say for discussion’s sake that your parent died on December 31, 2019 and left you the beneficiary of a million dollar IRA.

All right, you would be able to stretch that million-dollar IRA over your entire life. Let’s say your parents died on January 1, 2020. You would have to take all that IRA. Remember, nobody’s paid tax on it. So you’re gonna have to take that whole million dollars. You’re gonna have to come up with income tax payment on that million dollars of taxable income.

Okay. So this was an absolutely miserable, miserable, miserable rule, but thank goodness they put in the exception of the one surviving spouse and two people who qualify, well, they use the word eligible designated beneficiary. And then there was also a recent ruling that the IRS would take.

The designation that the Social Security Administration gives you, where before you had to prove it separately, but now if you qualify for SSI or SSDI, then the IRS will honor that, um, designation and let you stretch that inherited IRA over their lifetime. Right.

So today that’s still the case.

Yes. Ten years for everybody else. Uh, over the lifetime for a child with a disability.

All right. So they, so, so they do need to have that SSI, SSDI in place as soon as possible.


If they are going to be a beneficiary of…

And I will tell you, it is a bear to do, that is a lot of detail work. I’m not asking you to do anything that’s easy, but I’ll also tell you this, the odds of that getting done right, if it’s not you.are not great, or at least go down dramatically. Uh, frankly, I could never have done what my wife did. You know, she had so much patience. She dealt with so many doctors and school teachers and other people that Erica had contact with. And it was one heck of a job. Um, and nobody’s going to do that better for you than you.

And to think that you’re going to try to get that done after you die, that somebody else is going to do that, uh, not likely.

Wow. So this is great information. So I do have some other questions as we’re moving forward here.

Okay. Could I just pick up on one point that you brought up? There’s some very cool planning that grandparents can do.

All right. So, Tonya, if you were, if you’re, if your child did qualify for SSI and SSDI, let’s do the simple case. There’s some very cool planning that your parents can do in their will, in their trust, Um, that should not be ignored. And we can also use a concept called disclaimer where you’re let’s just keep it simple and say you’re the only child they leave everything to you.

They give you the right to either keep it or disclaim it. But if you disclaim it, it could go either into a creditor protection trust, the special needs trust or even the toggle. So there’s things that grandparents can do too.

Okay. So can they, can they leave it in a toggle trust for the child?

Yes, they can. The thing is most, even if they’re a grandparent, even if their grandchild has a disability, most grandparents are still going to want to take care of their kid first. Now, maybe you’re so stinking rich from the royalties from this, um, this, uh, podcast that you don’t need any money because I know you make a lot of money on this stuff.

Tons. We, we almost cover a portion of one of our recording sessions.

You almost cover, by the way, I have found that very typical and I love, I love being part of this community because We, I have found this community to be so given and so open and everybody’s trying to help everybody and we’re kind of like we’re, we’re all in this together.

And I felt that in different groups in the past and it’s just, it’s just a wonderful feeling, but anyway, notwithstanding your parents would probably rather give it to you and then let you worry about it. But let’s just say for discussion sake that there, I’m just going to make up a number there. Let’s assume that, uh, your kids qualify for SSI.

All right. They leave you a million dollars in an IRA. You’re going to have to take it out and pay taxes on it at your very high rate because of all the royalties you earned in 10 years. Let’s say that you had sufficient money that you didn’t need it. You could disclaim it. And then, if, if it works the way I want, then it goes into a trust where your kids, unlike you, can stretch that inherited IRA over their lifetime. So, meaning it’s, if we look at you and your kids as one economic unit, there’s a lot of tax savings to be made. By having the money go to the kids instead of you.

All right. So I want to just, just repeat this, this last little, little bit that we talked about. So, because some of our parents may be in the situation where their parents or the grandparent of the child is leaving or they’re, they’re putting the parents line in as the beneficiary.

So if nothing else changes, that parent has 10 years and they have to pay the tax upfront on that whenever, whenever they, they take it out, however, they can disclaim it and pass that on to their child. And if the child is already set up with the SSI SSDI, then they have their lifetime to use those funds as needed.

And if the beneficiary that let’s, let’s go back to your family, your mom and dad are preparing their will. Let’s keep it simple. Let’s forget about siblings. They’re going to start by leaving everything to you, not in trust. Cause you’re a big girl and they, they know that you’re mature and responsible and everything else.

All right. They leave it to you, but in, but in, in their documents. Both in their will, their trust, the beneficiary designation of their IRA. I wanna have something in there that says, I give Tony the right to disclaim any share. And by the way, you can disclaim the IRA, part of the IRA, the house, whatever they’re gonna leave you, you, they give you the right to disclaim.

And what you just, you can’t say, I disclaim. It goes here, I disclaim, it goes there. All you can do is say, I disclaim and it goes next in line. Who’s next in line? Oh, the special needs trust for my child that’s already drafted. Maybe even with the toggle. And by the way, what I would do is don’t necessarily take my word for it. That’s one of the reasons why we wrote this 450 page book. Um, it’s one of the reasons why we’re having this, this summit. Uh, you can read about it and see if you like the idea.

Right. And, and, and listeners make sure that, that you click on that link and see, see, see what’s happening with the summit. If you’re listening to this later and the summit is over, the, the book is there. A lot of that information will be there as well.

So I’m not going to have this wonderful summit that’s gonna have me, it’s gonna have Debbie McFadden, the SSI and SSDI person. It’s gonna have, uh, joy Steiner, the, you know, the wonderful estate attorney who writes. beautifully. She speaks beautifully. We’re not gonna have all this and then say, Oh, too bad you missed it.

You’re gonna have to wait a couple months before you get any benefit. No, no, we’re I don’t think we’re gonna have the whole thing up at once, but we’re gonna have some resources because what we find is that some people Learn best by reading. Some people learn best by viewing and most people learn even better by doing both. So we’re going to try to make that available.

Great. So, so listening, if you’re listening six months from now, click on the link and see what he, by then he may have all of it up anyway.

If people have a specific issue, the best source of information, particularly for readers is the book. Look at that table of contents.

Read about what you’re interested in. You know, then after the first thing, then you can go to other things, but that’s the key. That table of contents. It’s very, very specific. There’s a very good chance that there’s one or two issues that you have thought about that you’re looking for additional guidance on that will that will be in the book.

And then. Maybe after you do that and you get some confidence. Hey, this was some great information. You know, I didn’t know this. I didn’t know that. Then you can, you know, start looking more at the table of contents. Well, gee, what is the best estate plan? How does this special needs trust work? What’s a toggle?

Can I have some information on the toggle, et cetera, et cetera.

Before, before we finish here, um, I have some open-ended statements that I’d like to ask you so we can pass on some advice this way, and then I’m going to have you, um, give us just one, one more blurb about the, the summit too, before, before we close.

Okay, sure.

So listeners, if you’ve been following this season, you know, we’ve been doing some, um, different advice by starting a statement and then my guest is finishing it. So Jim has agreed to play along this episode. So the first one that I have for you, Jim, is the biggest fear I had about my child’s financial future was…

The biggest fear that I had about my child’s financial future is how’s my child going to have enough money to to comfortably live after my wife and I are gone.

Okay, so next statement. I wish every parent of a special needs child knew that…

I wish every child, every parent of a child with a, with special needs knew about, if they don’t already, qualifying for SSI and SSDI, and if their child has any type of reasonable chance to do everything in their power to make sure that that child qualifies. I want that child qualified for SSI and SSDI, typically after the child turns 18.

All right, last one, for parents feeling overwhelmed by financial planning, I would recommend…

For parents who are feeling overwhelmed, take some time. And I know that you’re busy. I know that you’re overwhelmed. I know that this is difficult. Take some time. Go through the process. Finish the process. Get it done. Then go think about something else. Don’t, don’t just, if you do nothing, you’re going to be in the same position two years from now.

You’re going to have the same anxiety, but you’ll have had two additional years of anxiety that could have, to a large extent, been alleviated had you done this. And believe me, I get it. You know, just the day-to-day, and particularly if your child is living with you, is just so difficult. It’s emotionally wrenching, uh, for many.

It’s physically demanding, um, you know, a lot of times, you know, our, our kids are not perfect patients, and they do things that test our patience. But you want to get this planning done. You want to make sure that you’re qualified for SSI/SSDI. You want to get that estate planning done and you want to get the Roth and all the financial part optimized because it’s going to make a big difference.

You’re going to feel a lot better. And are you going to do it all tomorrow? No, but not two years from now. You know, think about three to six months. You’re going to try to at least get this started. Um, and again, whether you use yourself, CPAs, estate attorneys, financial advisors, uh, people even in the community that offer this service. Um, you want to get this done. You’ll feel better. I promise you.

The summit and the book are at

In fact, if you, if you sign up for the summit, you automatically get the book. If you’re seeing this after the summit, that is after June 18th, I’m not sure what will be up there, but presumably we’ll still have generous offers. I know everybody’s arguing with me that I shouldn’t give the book away for free, partly because people won’t think it’s that good. Well, I, the re, the other authors, a whole bunch of the reviewers, including Burton Malkiel, uh, they, they think it’s the best book there is on the subject.

So, you want to get the book, uh, If it’s before June 18th, you want to sign up for the summit. The summit, we’re going to have the three authors, uh, we’re going to have a whole bunch of other speakers.

Well, Jim, I appreciate you spending some time with me today, going through so much information here.

I, I’ve learned a lot. A lot of this I knew, but I’ve learned even more. So I’m hoping that our listeners are staying with us. They can go back and listen to this repeatedly and, and get all of their notes together from the first part. And I’m hoping that you’ll see a lot of them at the summit too.

Tonya Wollum


Tonya Wollum is a disability advocate and host of the Water Prairie Chronicles podcast which connects special needs parents with resources to help them navigate parenting a child with a disability. She is the mother of 2 college-age children who have each grown up with a disability. That experience, along with a background in education, led her to create the Water Prairie Chronicles to help share what she has learned with parents of younger children to help them know how to advocate for their children.

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