Protecting the Future: Special Needs Trusts and Able Accounts Explained

For families with special needs children, creating a Special Needs Trust or an Able Account helps ensure that they can continue to receive necessary public benefits and support, even if their parents are no longer able to care for them. 

In this week’s episode of Retire in Texas, Darryl Lyons welcomes David Alvarez onto the show. David is a partner of PAX Financial Group and has a deep understanding of the financial advice world. 

Some of today’s topics discussed include: 

-Highlighting the importance of special needs planning and the need to make legal and financial preparations for their future.

-A breakdown of Special Needs Trusts and what benefits it can offer for a variety of different circumstances.

-What Able Accounts are, and why they are a more cost-effective way to save for the future of special needs children compared to setting up a Special Needs Trust.

-Emphasizing the importance of communication within the family regarding long-term planning.

If you enjoyed today’s episode, make sure to share it with a friend or loved one!


Darryl: Hey, thanks for tuning in to Retire in Texas. My name’s Darryl Lyons, I’m the CEO and Co-Founder of PAX Financial Group. And remember, this information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice.

Visit PAXFinancialGroup.com for more information. And I want to tell you and I’ll and I’ll start reminding you guys of this, that PAX is known as a group of fiduciaries who honor Judeo-Christian values and maybe one. I actually I’ve done a couple podcasts on our faith, but that’s an important phraseology for people to get a handle on what we do and how we do it.

We’re fiduciaries who honor Judeo-Christian values. If I didn’t get the feedback that I get on a near-daily basis, I probably wouldn’t do it. But it’s because I’m getting good feedback from you.

Emails and phone calls and all different ways. That’s why I keep doing this. The content appears to be resonating and helpful and I’m open to ideas. We spent the first half of this podcast interviewing all the incredible stories of people retiring or pivoting into the next chapter, and then I ran out of people. I mean, there’s still a few people out there that I need to get on the show, but I started doing the solo show and actually our views started to trend up.

And so, I felt that there was an appetite and I really pushed back because I didn’t think this was my strength, which I’m still not convinced is my strength, but this is where God has me. I get to critically digest content and be creative in the delivery of that content.

And today I’m not going to do a solo show. I actually have one of our top advisors here, David Alvarez. Welcome, David. 

David: Thank you so much for having me. 

Darryl: David is a partner of PAX Financial Group and we get reviews on all of our advisors. He gets some of the best reviews and there’s a challenge in our business because not only do you have to understand some of the technicalities of the financial advice world, which includes, you know, all the nerdy stuff of how to manage investment portfolios and then all the nerdy stuff of taxes and all that stuff is just really robust and it changes all the time.

Then you have to communicate it with empathy to the individual family and their unique needs, and you have to use good judgment. And so, this skill set of a financial advisor is a real, real challenge. But David hits it out of the park. And so, I’m really happy that David’s here. We’re going to talk specifically about special needs today.

You may not be in the world of special needs but tune into this because I think you’re going to be, you’re going to learn some new things and there’s going to be some things revealed to you that I think are very important. Before I jump into our topic of conversation. David, would you mind telling us a little bit more of your background?

Like where did you grow up and how did you get to PAX? Just kind of in a concise way if you don’t mind. 

David: Of course, yeah. So, I grew up here in San Antonio, went to St. Gregory’s Elementary School and then Antonian College Prep for high school, left San Antonio for college, spent the first 13 years of my career in New York and Chicago with a big global financial institution. Before finding my way to PAX four years ago. And so, I’ve been a financial planner or certified financial planner since 2012. And now I’ve been in this space for over 20 years working with families and in the investment world and in financial services in general.

Darryl: Now, what college did you go to?

David: I went to Northwestern University outside Chicago.

Darryl: Why did you pick Northwestern? 

David: Well, you know, I was silly enough to go visit them in June. And Chicago in June is pretty beautiful. And I think if I had visited in November, it might have been a different story. But, you know, frankly, I knew I wanted to study business. And Northwestern has some great economics. And obviously their Kellogg Business School is great, but I fell in love with the campus, and ended up meeting my wife there.

And so, I was obviously meant to go there. And I played baseball and, and so there’s, I’m happy I ended up there. 

Darryl: Yeah, that’s cool. Is your family from Cuba, right? 

David: Correct. Yeah. Both of my parents were born in Cuba. Yeah. And they both came over in 1962, and they, you know, grew up they did not know each other in Cuba.

They met in the U.S. But both of them, you know, left Cuba after the Castro takeover in the early sixties. And so, they were able to make a life here and meet each other. And I’m super thankful they did. 

Darryl: Your micro conversations remind me that Cuba has a really cool culture, and that sometimes we take our freedom for granted. Sometimes these little conversations remind me. So, thank you for that. Now, you have a family. Tell us about your family.

David: Yes. Married 17 years last week. And we have two boys, a 12-year-old and, seven-year-old. So, they keep us pretty active with their sports and band. And, you know, my wife is an entrepreneur, so she runs a small business. She has a flower shop. 

Darryl: And what’s the name of the flower shop?

David: And so, they do, you know, mostly subscription based floral delivery for small businesses.

Darryl: So as opposed to 1-800 flowers. Exactly. Okay, good. So, if y’all are listening, you need flowers. There you go. There you go. Cool. So, lots to talk about there.

I wanted to ask more questions, but I know I need to transition into the content because, frankly, we don’t want to have a long-winded podcast, but we’re going to talk about special needs. So, let’s start out. When you hear the term special needs, what does that really mean? And I mean, who does that apply to generally in the public? Yeah, can you define it more or less? 

David: Absolutely. So when we hear special needs in our industry, what we’re really talking about is somebody who has an intellectual or developmental disability that makes it hard for them to make their own decisions, whether it’s financial or health. And so, they need assistance. And you might think of that as being a pretty small group, but the statistics on it are actually really shocking.

Okay. So, we’re talking about children under the age of 18. About one in six are serious.

Darryl: And there’s a lot of it have to do with autism or I mean, I guess, is there one particular need that stands out or.

David: Autism is certainly a growing portion of that. Yeah. but there are, you know, obviously a lot of medical conditions that frankly 30 or 40 years ago, children wouldn’t have survived into adulthood.

Okay. Right. And so, there are a lot of developmental disabilities that we’re diagnosing more now or we’re noticing more now, intellectual disabilities that we’re noticing more now. But there are also medical disabilities that, frankly, children wouldn’t be able to survive 30, 50 years ago. And so, they are now, which is fantastic. And they’re able to, you know, live a life.

But, you know, it does require a little bit of extra planning for the parents and for anybody who loves them and wants them to have a, you know, a sufficient life.

Darryl: So, parents, I have four kids and they’re all different. And I would say that they would be able to fend for themselves, for lack of a better word in the world. But I have really, really close friends, really tight friends that their kids, you can’t say the same for their kids. They worry that it’s deep like it’s a gut worry that I just honestly don’t think my son or daughter is going to be able to fend for himself or herself. And I’ve had that worry before because my son was sick for a long period of time and praise God, he’s recovered.

But what the parents need to be thinking about, like they’re worried, but what do they need to be thinking about in terms of like down the road?

David: Yeah, well, a lot of the challenges when you’re in a position like that, the day to day is so challenging that it’s hard to think about 100%. That’s true. Yeah. And thinking long term, as you like to say.

Yeah, but it’s super important. So having a plan in place, whether it’s an estate plan for yourself and for your spouse, being sure that you have a plan in place for the care of your children in the future is number one. 

Darryl: Does that mean like care for the future if you died or if you’re just not able to care for them anymore yourself?

David: Yeah, because you’re worried.

Darryl: So, you’re like, I mean, I’m putting words in your mouth, but correct me if I’m wrong, but you’re like, okay, I 100% hear you. You’re dealing with my child’s teacher saying he can’t be in that classroom anymore. Right. You’re not thinking about ten years down the road. And so, ten years down the road, you’re thinking, okay, well, I’m just going to figure out how to make myself stronger in our family to do what we need to do financially so I can be there for them.

Right. And in that scenario, there’s certainly some important things to think about. But what you just said was, what if you’re not around, right? What if you died? Then what? And so, like, that’s kind of peculiar. But if parents die when a child who has special needs doesn’t have anybody, where do they go?

David: Yeah, that’s a big challenge. And if you don’t have a plan in place, you don’t get to decide that, right? You kind of get it into the hands of a judge or of, you know, your local authorities who decide those sorts of things. Yeah. One of the key things that a lot of people miss out on is, you know, when your child turns 18, you know, most of the time now they’re still living with you.

They may be in college, or they may still be in school, but legally, once they turn 18, they’re an adult. And so, if you have a child who has a disability that prevents them from making financial decisions or making medical decisions at that point, you need to make the legal steps appropriately to ensure that you can still make those decisions for them.

And so that may involve guardianship, or it may involve a, you know, some sort of medical and financial power of attorney. But the fact is, once they turn 18, they become an adult. And so, if you don’t have those appropriate legal steps taken, then no one will be able to make those decisions for them. They become a risk to themselves or to the community.

And that’s something you want to be on the lookout for. 

Darryl: That’s a good point. So that’s if you’re living now, tell us about how I guess the special needs trust is what I’m thinking about. If you passed away, how does that work? 

David: Right. So a special needs trust is a legal document that you set up where you can put assets that you want to be able to care for your child in the future. So, if you have investments or if you have a home, let’s say you have a rental property and you want the income from that rental property to help for the care of your child when you’re gone, well, you can put that property in a special needs trust. The trust will need to have a trustee. Okay. Who is not that child.

Right. So, if it’s somebody who has an intellectual or medical disability that prevents them from making financial decisions or a trustee will need to be placed in charge of that trust, it can be the parent while the parents are around, sure. But when you create that trust, you will want to name a successor trustee and so that you can avoid that situation whereas a parent you become disabled, or you’re gone and now nobody’s there to take care of your child.

You name a successor trustee. And I can’t emphasize this enough, and it goes with families. Whether or not you have special needs problems, communication is key. Yeah, right. Making sure everybody in the family knows, hey, if something happens to me, you are going to be in charge of your brother, right? Or, you know, you know, speaking with your spouse or making sure that the family, the whole family knows what the plan is if something happens to you.

Darryl: So, it’s a really good point. And I think there’s a lot to unpack there because that’s what we’re talking about like a family meeting and things like that. But I’m still wanting to make sure that our audience is clear on a special needs trust. What is the purpose of it? Like, what’s the main thing? 

David: Yeah, the main thing is when you are a person with special needs, you may have access to certain public benefits, such as what’s called SSI, Supplemental Security Income.

And so, when you are looking to gain access to these benefits that the government will do what’s called means testing, meaning do you have if you have enough money that you know you won’t qualify for these programs that make sense? Yeah. And so, putting assets in a trust like a special needs trust will allow you to still qualify for these programs.

And also, it provides a little, you know, liability protection. Somebody who has special needs may be a target for folks who are out there who are really, you know, not good people. Yeah, right. Try to take advantage of people who are intellectually disabled. Yeah. And so, putting assets in a trust gives them protection from, you know, people like that.

And it also gives them the ability to apply for and receive public benefits.

Darryl: So, the public benefits are often you have to qualify for those obviously. But if you do qualify under whatever considerations, unfortunately you can’t really impact that. But you can get a check. And what does that look like? Social Security income, is it 500? Is it 200?

David: So, it’s not much. Right. And that’s one of the reasons why you want to have trust in place or other assets out there. I think the average SSI check right now is about $800 a month. Okay. 

Darryl: And is that the same as SSDI? 

David: No. So that’s what makes it, you know, confusing, right? That’s why you have a job. Exactly. That this situation can be challenging enough as it is. SSI is a program specifically intended for folks who do not have enough resources and have not paid into Social Security. Okay. And so SSDI, both of these programs are run by the Social Security Administration, but SSDI is meant more for people who have paid into Social Security.

So, think of somebody who has worked a 30-year career and all of a sudden, they’re in their late fifties and unfortunately they have an accident or they have early onset Alzheimer’s and they can’t work anymore. They will likely qualify for SSDI to provide them disability insurance until they reach this full Social Security retirement age.

So SSDI is more for people who have earned into Social Security. Okay. SSI is more for people who have who have not or and who do not have the resources to provide for themselves otherwise. Okay. 

Darryl: And would SSI and Medicaid go hand in hand? 

David: They do, yeah. So, in most states, including Texas, if you qualify for SSI, you will qualify for Medicaid. And so it’s important, you know, from a from a planning perspective that for especially with somebody with medical challenges, some sort of if their disability requires a lot of medical care, a lot of medical expenses, you want to make sure you have the special needs trust or other accounts set up so that they qualify for these benefits so they can receive SSI and Medicaid.

Darryl: The last thing I want to mention is the able accounts. Those are something that’s kind of peculiar. Can you share with us what those are? 

David: Yes. Able accounts are relatively new in our world. So, they started in 2014, I believe it was the achievement of achieving a better life act. Right. So, a lot of our clients may be familiar with 529’s, which are used to save for college.

And so, it works very similarly in that the programs are administered by each state. And so, the state of Texas has an able account, and you can put money in there. And the money, you know, hopefully you can invest it and hopefully it grows over time. And any growth that you achieve in those accounts is tax free if the withdrawals are used for qualified disability related expenses.

Okay. And so, the able accounts are, I would say a lower cost way for people to set up some assets, put some money aside for children with special needs. If you don’t have the resources yet to put together a special needs trust, because a special needs trust will involve sitting down with an attorney and usually it’s, you know, thousands of dollars.

And so, an able account is a good way to start putting money on the side for a special needs child. 

Darryl: That’s a good point. So, if you have a young special needs child and you just want to save for their future enable account, it can be done. Is it relatively low cost? How much do you have to put in?

David: So, can you start as low as $100?

Darryl: Okay. And where do they go to get those able accounts?

David: So, give us a call here at PAX and we can walk you through the different options because there are different programs for each state, just like with 529. Yeah. So, because you live in the state of Texas, you don’t necessarily need to use the Texas Able account, but depending on where you live, you may have special tax benefits related to that state.

So, for instance, if you live in a state with an income tax such as the state of Michigan, yeah, any contributions you make to an able account will be deductible from your state income tax. That makes sense. So, it’s not relevant here in Texas. It is not relevant here in Texas.

Darryl: So, we covered a lot of ground in a short amount of time. We talked about special needs trusts. We talked about able accounts, Medicare, not Medicare, Medicaid, SSI, SSDI, a lot of stuff. Sometimes I know people go back and listen to this show again and if not, I encourage you, if you’re listening, you just need some direction because you’ve been kind of caught in the whirlwind of life, and rightfully so.

I get it. But if you need to unpack some of this stuff, can you provide the audience with your email? 

David: Yes. It’s just David@PAXFG.com.

Darryl: It’s very easy. David@PAXFG.com. 

Thank you.

David: I feel pretty special about that. That’s great.

Darryl: Yeah, it’s awesome. So, thanks to the audience for tuning in to the whole show. I appreciate it. I hope you learn a little bit of something, and our hearts certainly go out. I often believe some of the best ways to serve the community that has these special needs is through church. So, if you’re connected to a local church, you can certainly ask how you can help if God’s tugging at your heart there.

And if you do have a family that needs direction, we’re happy to serve. And David has the heart of a servant. So, thank you for tuning in again. And as always, I want to remind you, you think different when you think long term. Have a great day.

Disclaimer: Clicking the Like button does not constitute a testimonial for, recommendation or endorsement of our advisory firm, any associated person, or our services. Clicking the Like button is merely a mechanism to circulate our social media page. “Like” is not meant in the traditional sense. In addition, postings must refrain from recommending us or providing testimonials for our firm.

Ready to have a real conversation about securing your future?

Schedule a free no-strings-attached phone conversation.