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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A contract with an insurance company that guarantees current or future payments in exchange for a premium or series of premiums. The interest earned on an annuity contract is not taxable until the funds are paid out or withdrawn. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, penalties may apply. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have fees and charges associated with the contract, and a surrender charge also may apply if the contract owner elects to give up the annuity before certain time-period conditions are satisfied.
A defined contribution plan established under section 401(k) of the Tax Code. A plan in which employers may elect, as an alternative to receiving taxable cash in the form of compensation or a bonus, to contribute pre-tax dollars to a qualified tax-deferred retirement plan.
A college savings plan that provides professionally managed, tax-advantaged investment portfolios designed to help meet tuition and other higher education expenses at any eligible educational institution on the country.
An ABLE account is a tax-advantaged savings account available to individuals diagnosed with disabilities before age 26 (or age 46 starting in January 1, 2026). The ABLE account is exempt for up to $100,000 for SSI recipients and allows a person with a disability to manage their own funds.
A federal program that ensures health care for all Americans. Many persons with disabilities will qualify for subsidies if their income is under 400% of the Federal Poverty Level (FPL), or they may qualify for expanded Medicaid if their income is under 138% of FBP.
Laws that penalize people who, in order to become eligible for means-tested benefits, such as SSI and Medicaid, have transferred their assets to others for less than fair market value.
A contract with an insurance company that guarantees current or future payments in exchange for a premium or series of premiums. The interest earned on an annuity contract is not taxable until the funds are paid out or withdrawn. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, penalties may apply. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have fees and charges associated with the contract, and a surrender charge also may apply if the contract owner elects to give up the annuity before certain time-period conditions are satisfied.
Anything of value, including cash, promissory notes, tangible and intangible personal property, and real estate.
A financial statement that shows the assets, liabilities, and owner’s equity of an entity on a specific date.
A type of property ownership held by people who are expected to benefit from trust assets in some way but who currently have no legal claim to them. The beneficiary of special needs trust has a beneficial interest in the trust assets.
Any person or entity entitled to inherit or receive property under a will or trust. The person for whom a special needs trust is created and whose needs will be paid for under the terms of the trust is the trust beneficiary.
A document in which the owner of a deposit account, retirement accounts, brokerage account, or life insurance policy names a beneficiary to receive any funds left in the account at the owner’s death.
The giving of assets, such as stocks, bonds, mutual funds, real estate, and personal property, to beneficiaries through the provisions of a will.
A way of acquiring necessary capital. One form of borrowing is when an individual or a company asks a bank to loan them a certain mount of money, over a certain period of time, and agrees to pay a certain amount of interest.
An insurance policy that covers the cost of disposing of a person’s remains.
One of the investment objectives of mutual funds that purchase securities whose value is expected to rise.
Capital expenditures are funds used by a family, a business, or a corporation to acquire or upgrade physical assets such as property, a house, or other equipment.
The amount that a security’s market value increases over the original purchase price, or the amount that a mutual fund increases as reflected in the price of the shares.
A decrease in the value of a capital assets, calculated by the difference in price at which an investment was purchased and the price at which it was sold.
The method frequently used by insurance agents and planners to calculate the amount of insurance needed to replace both the future income stream of an individual and the present dollar value of special future goals.
Short-term, highly liquid investments.
The amount of money that should be kept in investments that are easily converted into cash within 5 business days and is available to meet current cash needs and to cover for any unforeseen short-term emergency. Examples are money market funds, treasury bills, saving accounts, and so forth.
A brief document containing essential information about a trust, which financial institutions use to set up a bank account for a trust.
An arrangement whereby the donor makes a gift to charity and receive a guaranteed lifetime (or joint lifetime) income based on the age(s) of the annuitant(s).
Irrevocable trust in which one or more individuals are paid income until the grantor’s death, at which time the balance is passed on to a designated charity.
A form of trust in which the gift places substantial funds or assets into a irrevocable trust with an independent trustee. The assets go to a designated charity upon the death of the donor, but the donor (or specific beneficiary) receives regular profits from the trust during the donor’s lifetime.
A set of publications containing regulations issued by federal agencies and organized by subject. Regulations for SSI program are found in 20 C.F.R §§416.101 and following.
A legal document that supplements and changes an existing will, generally restricted to minor changes to the original will.
One of two types of stock an investor may purchase in a company. Most stock is common stock. Investors who purchase it have voting rights at the company’s annual stockholders’ meeting. Common stockholders are not guaranteed dividends, but they may receive higher dividends during the company’s prosperous period. If a company fails or liquidates, common stockholders are paid after bondholders and preferred stockholders.
See “pooled trust.”
The ability of an asset to generate interest that is then added to the previous principal plus interest.
Temporary SSI payments made on the condition that the recipient gets rid of certain assets in an appropriate manner. They are made if an application for SSI has too many assets to qualify for that program.
A person appointed by a court to make personal and/or financial decisions for another person (the conservatee or ward) who is not able to make them.
The relationship between a conservator and conservatee.
A bank or another financial institution that provides trustee services for various types of trusts. Many special needs trusts expected to be funded with $250,000 or more have a corporate trustee, instead of a family member, manage trust assets.
A Latin term for the assets held in a trust.
One of two or more persons or institutions named to manage trust assets together.
Property that the SSI and Medicaid programs consider available to an applicant or a recipient when determining that person’s eligibility for benefits. Assets held in a properly drafted third-party special needs trust are not countable assets.
A trust provision that allows the trust beneficiary to withdraw a limited amount of funds during the limited time period each year. It is used in a life insurance trust to qualify the amount that can be withdrawn as a present interest for the annual exclusion amount.
Money owed and payable by a company or individual, usually within one year.
An arrangement created under a state law called the Uniform Transfers to Minors Act, under which a person may name an adult (the custodian) to manage property left to a minor until the minor turns an age between 18 and 25, depending on the state.
Money an individual owes to a lender. This can be in the form of credit card debt, automobile loans, and mortgages.
The risk that a company or individual will be unable to pay the principal or contractual interest on its debt obligations.
An annuity in which the annuitant wishes to allow earnings received into the separate account during the accumulation phase to accrue tax deferred until some future time.
Property left outright to someone. SSI and Medicaid benefits might be reduced or eliminated if a recipient receives a direct inheritance since the inheritance will be counted as income in the month received and as a resource in the following months. Property left to a special needs trust is not counted as a direct inheritance.
In general, a physical, sensory, psychiatric, learning, or intellectual impairment that affects daily living activities. Disabilities can be either temporary or permanent; they can arise from illness or injury or be present from birth. For the purpose of obtaining SSI and Medicaid, a disability is a mental or physical condition that leaves someone permanently unable to “do any substantial gainful activity.”
Most Social Security claims are processed through a network of Social Security Administration field offices. Social Security field offices review the application and send the paperwork to the federally funded Disability Determination Center. The Determination Center decides if an individual meets the definition of being disabled.
Having a disability. Many people with disabling conditions prefer to be identified according to their specific disability, such as “a person with paraplegia” or “a person with cerebral palsy.”
Payments of trust funds by the trustee. In a special needs trust, the trustee typically makes disbursements to pay for the beneficiary’s needs that aren’t covered by SSI or Medicaid, such as a companion, school tuition, books, or hobby equipment.
An individual’s income that is available to be spent after paying for the essential expenses such as food, clothing, and shelter.
The process of accumulating securities in different types of investments, industries, risk categories, and companies in an effort to reduce the potential risk of loss that may be associated with one investment.
A diversified management company that invest substantially all of its assets in a portfolio of common stocks in a wide variety of industries.
A cash payment distributed to shareholders. Dividends are financed by profits and are announced by the company’s board of directors before they are paid.
A legal document that allows one person (the principal) to authorize another person (the attorney-in-fact or agent) to act on his or her behalf with respect to specified types of property and that may remain in effect during a subsequent disability or incompetency of the principal.
A legal document which grants decision-making powers related to health care to an agent; generally provides for removal of a physician, the right to have the incompetent patient discharged against medical advice, the right to medical records, and the right to have the patient moved or to engage other treatment.
Wages paid by an employer or income from self-employment. Earned income can result in a reduced SSI payment.
The ownership interest of common and preferred stockholders
The ownership interest of common and preferred stockholders in a company.
Legal issues typically faced by the elderly, including government benefits, nursing home care, and elder abuse.
All the assets a person possesses at the time of death, including securities, real estate, interest in business, physical possessions, death benefit of life insurance policies, and cash.
Creating documents necessary to carry out your wishes for what should happen to your property and minor children after your death. Often, estate planning involves strategies designed to minimize probate fees so that more is left for inheritors.
Federal and state taxes imposed on the value of a person’s net worth at death. For deaths in 2023, federal estate taxes apply only to estates with a net worth greater than $12.92 million, but some states tax smaller estates. For married couples, this threshold is doubled, meaning the net worth for 2023 can go up to $25.84 million. These thresholds will be cut in half at the end of 2025, to $6.2 million or an individual or $12.4 million for married couples.
The person named in a will to carry out the will’s provisions, including filing the will in the proper court, inventorying the deceased person’s property, paying debts and taxes, and distributing the remaining property to the beneficiaries named in the will. Called personal representative in some states.
See “noncountable resource.”
The share of the SSI grant paid by the federal government. Many states add a supplementary grant to the federal benefit rate. In 2023, the federal benefit rate for SSI is $914.
An annual guideline issued by the U.S. Department of Health and Human Services, used to determine who received federal ais or subsidies. The Affordable Care Act uses the FPL to determine who qualifies for subsidies and who should have access to expanded Medicaid. In 2023, the FPL for an individuals is $14,580, except in Alaska where it is $18,210 and Hawaii where it is $16.770.
A person who owes a special duty of trust to another person or entity. In a special needs trust, the trustee owes a fiduciary duty to the beneficiary of the trust to strictly comply with the trust’s terms and to manage the trust solely for the beneficiary’s benefit.
A person skilled in assessing people’s financial needs and the various options for meeting them, including various types of insurance and investments. Many financial planners are certified by a central trade organization, but governments don’t license them.
A special need trust funded with property belonging to the beneficiary, such as a direct inheritance, recovery in a personal injury lawsuit, or gift.
Insurance product that provides for lifetime retirement income in designated (fixed) monthly installments.
A long-term tangible asset or the real property, plant, and equipment of a business or individual.
A cost that remains constant and that the consumer has limited control to change (i.e., mortgage, rent, insurance, taxes.)
A description of investments in preferred stock, bonds, certificates of deposit, and other debt-based instruments that pay a fixed amount of interest.
A security that pays an unchanging rate of interest or dividends. Fixed-income securities include bonds, certificate of deposit, money market instruments, and preferred stock.
Ordinary food—that is, food that isn’t necessary because of special medical needs—needed by a beneficiary of a special needs trust should be paid for by SSI. If the trustee of a special needs trust pays for the beneficiary’s food, the SSA considers the amount paid as income to the beneficiary and deducts it from the grant, up to a certain amount.
The description of a residential placement that is completely funded by the government.
Putting property in trust by assigning the property to the trust or changing title documents to reflect the trust’s ownership. Technically, the trustee owns the trust property, subject to the trusts’ terms and the trustee’s fiduciary duty.
As defined by the SSA, just about any property typically used in a home. Furniture and personal effects are not counted as resources for the purpose of determining a person’s eligibility for SSI and Medicaid.
Property permanently transferred to someone without receiving anything in return. Property transferred to an irrevocable living trust while the giver is alive is considered a gift because the property can’t be taken back. However, property transferred to a revocable living trust is not a gift, because the giver does not give up control over it and can revoke the trust at any time. Finally, property left at death under a will or living trust is commonly called a gift.
A federal tax on gifts (cash or assets) that are worth over $17,000 (for 2023) made by one person to a single recipient in one calendar year. The tax is not payable when the gift is made, but rather when the person giving the gift dies. Those who die in 2023 can make taxable gifts (during life and at death) that total up to $12.92 million per individual before owing gift tax. These exemption amounts increase with inflation.
The honest belief that one’s actions are correct and appropriate. Some special needs trusts provide that trustees are not liable for losses caused by actions taken in good faith. Others do not excuse any actions that cause harm to a beneficiary, even if made in good faith.
Someone who creates a trust. Also called settlor or trustor.
Generally includes the value of all property that the decedent owned, had an interest in, or controlled at the time of death. In addition to property that an individual may own in his or her name, it includes property that avoids probate, such as joint tenancy property with rights of survivorship and life insurance proceeds paid to a named beneficiary.
For purposes of the Medicaid program, a home in which two or more SSI recipients live and receive food and shelter for one overall price.
A mutual fund whose aim is to provide for a degree of both income and long-term growth.
Appreciation on an initial investment.
Property that was purchased with the intent to appreciate. Any income generated by the property is incidental.
An ownership interest in a company that is growing earnings and/or revenue faster than its industry or the overall market. Such companies usually pay little or n dividends, preferring to use the income stead to finance further expansion.
A person appointed by a court to handle the personal and financial affairs of a child, or of an adult who has been judged to be unable to handle these matters alone. In many states, the term conservator is used when the incompetent person is an adult.
A document that contains language that helps an assigned person to make medical decision if you are unable to do so (also called power of attorney.)
A trustee who is not related to the beneficiary of the trust and does not stand to inherit any property under the trust. Independent trustees are preferred when family members are likely to disagree over the management of the trust. However, independent trustees’ fees are usually higher than those charged by a family member.
Increases in the general price level of goods and services. Inflation is commonly reported using the Consumer Price Index as a measure and is one of the major risks to investors over the long term.
An important economic indicator, this is the rate at which prices for goods and services are rising.
Uncertainty over the future value of an investment due to the possibility that the value of assets or income will decrease as inflation shrinks the purchasing power of a currency.
Property received as a result of another person’s death. Typically, a person receives an inheritance under the terms of a will, revocable living trust, or state law. (Property belonging to people who die without a will is distributed in probate according to the state’s laws of intestate succession.)
See “in-kind support and maintenance.
Shelter or food provided to an SSI recipient. The SSA considers the value of ISM as income. It will reduce an SSI recipient’s monthly grant, dollar for dollar, by the total value of the ISM the beneficiary received in a month, up to a certain amount ($324.66 in 2023). Also called “in-kind income”
Payments borrowers pay lenders for the use of their money. A corporation pays interest on its bonds to its bondholders.
An important economic indicator, this is the price, calculated as a percentage of the money loaned, that a financial institution charges borrowers for the use of the institution’s money.
A trust created by a person during their lifetime (inter vivos is Latin for “between the living”). The most popular form of inter vivos trust is the revocable living trust. However, an inter vivos trust can also be irrevocable—for example, when living grantors create special needs trust that they immediately put into effect.
When one dies without a valid will, he or she is said to have died intestate and his or her property will be distributed under state succession statutes, generally of the state in which he or she was domiciled at death.
The documented intent of a particular asset. One example is growth, where the investor wants an investment asset to appreciate. A second example is income, where the investor wants to generate cash flow.
A trust that cannot be changed or terminated by the person who created it without the agreement of the beneficiary.
The written contract between a person who contributes funds to a pooled trust on behalf of a disabled loved one and the nonprofit organization operating the pooled trust. The joinder agreement “joins” the beneficiary’s funds with the other funds in the pooled trust.
Asset ownership for two or more persons in which each owner holds an equal share and may give away or sell a portion or all that share without the permission of the other owner(s). In the event of death, an owner’s share is divided equally amount the surviving co-owners.
Local education agency. Another term for a community’s school district.
Although not legally binding, this form communicates your desires and concerns to future caregivers. It covers vital statistics, your child’s financial picture, details about what works well or not so well for your child, suggestions about what changes might be needed for the future, a list of the locations of all pertinent documents and records, and individuals that are important in your child’s life.
See debt obligations.
Type of settlement option chosen by the annuitant that allows for the payment of retirement income for the entire lifespan of the annuitant. This pay-out option, sometimes referred to as straight life, typically allows for the shortest pay-out period to the annuitant as they are paid over the lifetime of one annuitant. If the annuitant dies, one month later payments cease. Since this pay-out will be over the fewest number of years, the annuitant will receive the largest possible check. Because the annuitant is receiving a larger payment, the annuitant is also getting a faster return of the principal amount. This return of principal will allow the annuitant to obtain the largest amount of tax exclusion because the principal amount consists of after-tax dollars that were used to fund the annuity.
A trust created during the grantor’s lifetime, usually to avoid probate. The grantor is usually the trustee while the grantor is still alive; then, the successor trustee takes over and distributes the trust property to beneficiaries named in the trust document.
Those assets that can easily be converted into cash within 5 business days without a penalty.
Liquid net worth includes all assets that can be liquidated within 30 days, exclusive of real estate holdings. This includes, but is not limited to, checking and savings accounts, IRA accounts, all marketable securities, commodity accounts, cash, money market funds, and precious metals.
A document which allows people to specify in advance of an illness or injury medical treatments to be administered or withheld.
Nursing home care that lasts more than two months. Nursing home care typically is paid for by long-term care insurance, or by Medicaid if the patient meets strict income and resource limitations.
Coverage that, under specified conditions, provides skilled nursing care, home health care, or personal or adult day care for individuals with a chronic or disabling condition that needs constant supervision. Long-term care insurance offers more flexibility and options than many public assistance programs.
Coverage that, under specified conditions, provides skilled nursing care, home health care, or personal or adult day care for individuals with a chronic or disabling condition that needs constant supervision. Long-term care insurance offers more flexibility and options than many public assistance programs.
A special needs trust under which a nonprofit organization operates a pooled trust on behalf of many individual beneficiaries.
The ease of difficulty with which securities can be sold in the market.
Date on which a principal amount of a note, draft, acceptance bond, or other debt instrument becomes due and payable.
A health care delivery program intended to serve people with limited income and resources. State and federal funds pay for Medicaid. States administer the program and (under federal rules) determine who is eligible for benefits.
People whose income is too high for regular Medicaid eligibility, but who are eligible for benefits if they contribute part of their income (called their share of cost) toward their medical care.
A health care delivery system available to people who qualify because of age or disability and work history. Medicare eligibility does not depend on a person’s income or resources. People who qualify for Medicare might still need Medicaid to pay for prescriptions and long-term care, and many people with limited income and resources receive benefits under both programs.
A mutual fund that invests in short-term corporate and government debt. Interest payments are passed on to shareholders. The fund aims to keep the net asset value at $1 per share to simplify accounting, but the interest rate does fluctuate.
An open-ended fund operated by an investment company that raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. The market price of the fund’s share fluctuates daily with the market price of the securities in its portfolio
Failure to act in a way in which a reasonable and prudent person would act under similar circumstances.
Property that is not considered a resource by the SSI and Medicaid programs for purposes of determining program eligibility.
Investments that cannot be easily converted into cash within 5 business days.
The federal Omnibus Budget Reconciliation Act, a law that, among other things, describes the circumstances under which property in a special needs trust will be considered the trust beneficiary’s resource for the purpose of determining eligibility for SSI and Medicaid. (42 U.S.C. §§ 1395 and following.)
A provision in a special needs trust requiring that, after the beneficiary dies, the trustee must use any property left in the trust to reimburse Medicaid for benefits the beneficiary received. Special needs trusts containing property originally belonging to the beneficiary (first-part trusts) must have a payback provision to avoid having the property considered the beneficiary’s resource for program eligibility purposes. Third-party trusts do not have a payback provision.
A section in the Omnibus Budget Reconciliation Act of 1993 governing Medicaid provides that a person can maintain eligibility for government benefits if he or she places excess funds in an eligible trust. This trust is created with the assets of a disabled individual under age 65 and is established by his or her parent, grandparent, or legal guardian, or by a court. They also must provide that, at the beneficiary’s death, any remaining trust funds will first be used to reimburse the state for Medicaid paid on the beneficiary’s behalf.
A Latin term that describes a method of distributing the assets of someone who has died so that each branch of the family receives an equal share of the estate.
Designed to provide lifelong financial protection; as long as the necessary premiums are paid, the death benefit will be paid. Most permanent policies have a feature know as cash value that increases (tax deferred) over the life of the policy and can be used to help fund financial goals (e.g., retirement, education expenses).
See “executor.”
A plan (approved by SSI) that allows an SSI recipient to own otherwise countable resources as part of an effort to become self-supporting.
Program Operations Manual System, a set of guidelines issued by the Social Security Administration to help lower-level employees interpret the federal statutes and regulations that govern the SSI and Medicaid programs.
A special needs trust operated by a nonprofit organization for the benefit of several beneficiaries. Assets are jointly managed and invested. SSI does not consider pooled trust funds donated by a third party for a beneficiary to be a resource available to the beneficiary.
The legal right of an individual named to act on another’s behalf during his or her lifetime, in the event that disability or incapacitation renders that person unable to make decisions on his or her own behalf. Decisions may be made concerning assets and property or health care (also called a health care proxy).
The points in time that require a parent or guardian to take specific action to protect eligibility for government benefits, apply for benefits, or work with various government agencies or school systems on behalf of an individual with special needs. This may involve a transition period over time or completing an application on a specific day. In addition to the requirements that pertain to an individual with disabilities, traditional planning points are college, retirement, and death of a parent. The overall goal is to identify these points in advance and implement various strategies to plan for these moments in time.
The presumed value of food or shelter provided to an SSI recipient by a third party. The PMV is one-third of the amount of the federal portion of the SSI grant plus $20. In 2023, this amount is $324.66. The recipient can prove that the value is, in fact, less.
Property held in trust. Income generated by the principal of the trust is considered income in the year received and principal if retained in the trust after that time. Also called “trust corpus.”
A person’s home and the land on which it is situated. SSI does not consider a person’s principal residence a resource, regardless of its value.
A court proceeding in which the probate judge establishes the authenticity of a will (if any) and appoints the person (the executor or administrator) who will be responsible for handling the deceased person’s estate. The executor or administrator pays the deceased person’s debts and taxes, identifies the people who will inherit the deceased person’s property, and distributes the property to them. Probate happens only when someone petitions the court to open a probate proceeding and affects only property that hasn’t been disposed of in some other way—for example, through a trust or “beneficiary designation.”
A law containing investment principles articulated by a group of nationally respected judges and law professors. Most states apply these principles to trustees in the absence of contrary investment instructions in the trust documents. As a whole, the law requires trustees to make common sense investment decisions that will best serve the purposes of the trust.
The calculation that measures the gain on an investment over a period of time.
A person or an institution named in a special needs trust to receive trust property that remains in the trust at the death of the disabled beneficiary.
In cases in which an individual is not capable of managing his or her own Social Security benefits and after careful investigation, a person appointed by Social Security, who may be a relative, friend, or another concerned party, to handle that individual’s Social Security matters, who is then required to provide detailed records of the distribution of these funds. A person having power of attorney over an individual does not automatically qualify that person to be a representative payee.
A distribution based on the life expectancy of an IRA owner or qualified retirement plan participant designed to satisfy certain minimum requirements impose by the IRS upon attaining age 72. Failure to satisfy the distribution requirement may result in a 50% excise tax on the amount not withdrawn.
For purposes of determining SSI eligibility, any property that the SSI program considers available to the applicant. See “countable resource” and “noncountable resource.”
Money that cannot be accessed by the owner prior to turning age 59½ without paying a penalty.
See “living trust.” The term “revocable” refers to the ability of the person who sets up the trust to amend or revoke it.
A concept that risk is associated to return; the possibility that an investment will not perform as anticipated. In other words, the higher the return, the greater the risk, and vice versa.
An individual retirement account (IRA) set up by an individual to receive a distribution from a qualified retirement plan. Distributions rolled over into a rollover IRA are not subject to any contribution limits. Additionally, the distribution may be eligible for subsequent rollover back into a qualified retirement plan available through a new employer. To retain this eligibility, the IRA must be composed solely of the original rollover contribution and earnings (i.e., no other contributions or rollovers may be added to or mingled with the IRA), and the new employer’s plan must permit the acceptance of rollover contributions. Also known as a conduit IRA.
A Roth individual retirement account (IRA) designated as a conversion IRA. The only permissible contributions to a Roth conversion IRA are amounts converted from a traditional IRA during the same tax year. It is no longer necessary to keep contributory Roth money separate from converted Roth money.
An individual retirement account (IRA) in which contributions are not tax-deductible, qualified distributions from the account are not taxable, and earnings on the account are taxable only when a withdrawal is not a qualified distribution.
Preserving the value of an investment.
The Section 8 Housing Choice Voucher Program is the federal government’s major program for assisting very low income families, the elderly, and individuals with disabilities to rent decent, safe, and sanitary housing in the private market. Since the housing assistance is provided on behalf of the family or individual, participants are able to find and rent privately owned housing, including single-family homes, townhouses, and apartments. The participant is fee to choose any housing that meets the requirements of the program and is not limited to units located in subsidized housing projects.
A law that became effective on January 1,2020, changing how retirement accounts are inherited after the account owner’s death. Under the act, most beneficiaries of an inherited retirement account will be forced to receive the money within 5 to 10 years, which could lead to a high income tax for the receiving individual. Persons with disabilities and their special needs trusts, however, can avoid this 5- to 10-year deadline and stretch out distributions over the individual’s lifetime. In order to receive this stretch-out, the special needs trust must contain special language.
Borrowed funds that are backed by a specific asset. For example, a home mortgage is backed by the value of the residence. If the borrower does not abide by the terms of the agreement, the lender has a legal right to the residence.
A “first-party special needs trust” established by the person with a disability and funded with the person’s own assets, such as a direct inheritance, recovery in a personal injury lawsuit, or gift.
Money that is intended for long-term savings that may be subject to early withdrawal fees or fluctuations in price or value.
Someone who creates a trust; another term for “grantor.”
For SSI purposes, any item commonly associated with housing, such as rent, heat, utilities, and mortgage payments. Disbursements from special needs trusts for shelter are considered in-kind support and maintenance (“In-kind support and maintenance” or ISM) and are deducted from the SSI grant up to a certain amount.
A place of employment designed and managed to accommodate the needs of people with disabilities.
Method of purchasing any annuity in which the annuitant deposits one lump sum of money into the account. The money will then remain in the account and accrue as tax deferred until the annuitant elects to begin the pay-out phase. At pay-out, the annuitant will pay ordinary income tax on all earnings in the account that are in excess of the cost basis.
A collection of federal statues that govern a variety of federal programs, including Social Security retirement and disability benefits, Medicare, SSI, and Medicaid.
The agency charged with administering the programs created under the Social Security Act, including SSI and Medicaid.
All needs of a disabled person for goods and services other than food and shelter, which SSI deems to be provided in the SSI grant itself.
A trust designed to hold and disburse property for the benefit of an SSI recipient, without the SSI and Medicaid programs considering the trust property or disbursements to be a resource or income. To accomplish this purpose, the trust typically gives the trustee sole discretion over trust disbursements and bars the trustee from making disbursements that would impair the beneficiary’s eligibility for SSI and Medicaid. In addition, the trust must bar creditors from going after trust assets. A special needs trust funded with the beneficiary’s own property (a “first-party special needs trust”) is subject to additional restrictions.
A process in which a person spends resources on immediate needs when that person would like to apply for certain Medicaid benefits but has resources over the resource limit. When the applicant’s resources are sufficiently reduced, the applicant will qualify for Medicaid.
Clauses in a trust aimed at protecting the trust property from the beneficiary’s creditors or allowing the beneficiary to use the trust property as collateral for a loan. All special needs trusts contain spendthrift provisions.
Social Security Disability Insurance. A program financed with Social Security taxes paid by workers, employers, and self-employed persons. In order to be eligible for a SSDI benefit, the worker must earn sufficient credits based on taxable work. Disability benefits are payable to workers with disabilities, disabled widows or widowers, or adults disabled since childhood who are otherwise eligible. Auxiliary benefits may be payable to a worker’s dependents as well. The monthly disability benefit payment is based on the SSDI earnings record of the insured worker on whose Social Security number the disability claim is filed.
Supplemental Security Income. The SSI program provides monthly income to people who are age 65 or older, or are blind or disabled and have limited income and financial resources. Effective January 2006, the SSI payment for an eligible individual was $603 per month and, for an eligible couple, $904 per month. If only one person of a married couple is eligible, a portion of the spouse’s income may be counted. In addition, the individual’s financial resources (savings and assets owned) cannot exceed $2,000 (3$3k000 if married). Individuals can be eligible for SSI even if the have never worked in employment covered under Social Security.
An instrument that signifies an ownership position in a corporation.
A person named in a trust to take over as trustee when the first trustee dies or is otherwise unable to serve. In a revocable living trust, the first trustee is the person who sets up the trust (the grantor). The successor trustee is the person who carries out the provisions of the trust after the grantor’s death.
Another name for a “special needs trust.”
A type of trust that allows the trustee to make disbursements for the beneficiary’s general support as well as other needs. A support trust does not qualify as a special needs trust for the purpose of sheltering trust property from consideration as a resource by SSI and Medicaid.
Secures the performance on fiduciaries duties and compliance with court order.
Established by Congress effective September 21, 1972, (PL 92-425) to provide a monthly income to survivors of retired military personnel upon the member’s death when retired pay stops. Survivors of members who die while on active duty, and survivors of members recalled to active duty from retirement that die while on active duty, may also be protected by the SBP.
This type of life insurance covers two individuals and pays the death benefit at the death of the second insured. The premiums are significantly less than two traditional insurance policies because the policy insures two lives for one benefit. For older individuals with some health considerations, this may be a viable option for coverage. The policy can be designed using either whole-life insurance, term insurance, universal life insurance, or a combination of these. This product is frequently used in the disability market because the major concerns usually develop at the death of the second parent (or caregiver), a time when money is often needed the most.
When a guardian or conservator is required on a temporary basis or pending the general guardianship appointment. A temporary guardianship may be granted until a problem is settled, or a permanent arrangement can be made. Such a court appointment can either be responsible for the person, the estate, or both.
A form of ownership held by at least two persons. Each owner has a specific percentage interest in the account and, upon death of one of the owners, those shares become part of the deceased owner’s estate.
A type of life insurance that pays out the face value of the policy at the policy owner’s death but that does not have an investment or savings feature. Term life insurance is often used to fund a special needs trust.
A trust created as part of a will or revocable living trust that goes into effect at the grantor’s death.
Someone who makes a will.
A special needs trust funded exclusively with property given by people other than the beneficiary. Compare “first-party special needs trust,” which contains property originally belonging to the beneficiary.
The concept that money available today is worth more than that same amount in the future.
A measure of investment performance that starts with price changes, then adds in the results of reinvesting all earnings, such as interest or dividends, generated by the investment during the period being measured.
The act of getting rid of property for less than its fair market value in order to become eligible for SSI or long-term care benefits under Medicaid.
An account registration used to help avoid probate, transferring assets to a pre-assigned beneficiary upon the death of the account owner.
Debt obligations of the US government. They are secured by the full faith and credit of the US federal government. The interest on treasuries is exempt from state and local taxes but is subject to federal income tax. There are three types of treasuries: treasury bills with maturities of 1 year or less; treasury notes, with maturities ranging from 1 to 10 years; and treasury bonds, long-term instruments with maturities of 10 years or more.
An arrangement under which a person called a trustee has a duty to manage certain property in a way that benefits a beneficiary. Trusts are created for many different purposes. See “special needs trust” and “living trust.”
A trustee’s management of trust property according to the trust’s terms and for the benefit of the beneficiaries.
An individual, often a family member or friend, who will provide input on behalf of the beneficiary to the trustee that can be a professional trustee. This role removes the fiduciary responsibility of the individual but allows them to be involved in the activity of the trust.
A group of people given limited authority to review a trustee’s actions. Depending on the terms of the trust, a trust advisory committee could have the authority to remove and replace a trustee, review trust records, and make minor modifications to the trust document. A single individual appointed in this role is call a “trust protector.”
A person named in a trust instrument, or chosen by an existing trustee, to manage the trust under the terms of the trust document. The trustee must be loyal to the trust and avoid conflicts of interest with the trust beneficiaries. In a special needs trust, the trustee has a duty to manage the trust so that the beneficiary’s special needs will be met without jeopardizing the beneficiary’s eligibility for SSI and Medicaid.
Specific grants of authority given to a trustee by the trust document in addition to, or in place of, authority granted by state law.
For SSI purposes, all income that does not result from employment.
A law that provides a method for transferring property to minors and arranging for an adult, called a custodian, to manage the property until the child is older.
A type of permanent life insurance that allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums. This policy also permits you to reduce or increase the death benefit more easily than a traditional whole life policy. To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health.
A debt or money owed that is not backed by assets or collateral; such as credit card debt.
Property that is owned by an individual that cannot be used to generate an income (e.g., a personal residence).
Expenses that will change over time and items that an individual may have control over. They generally consist of necessary expenses that may vary, such as utilities.
The legal term for a person under guardianship or conservatorship.
A type of life insurance that builds up equity in the policyowner’s name and pays out a predetermined amount—when the insured person dies—to beneficiary designated by the policy owner. Compare “term life insurance.”
A legal document that defines how a person wishes his or her estate or property to be dispersed after his or her death. The document must be signed by the testator in the presence of two witnesses, who must also sign. An executor or executors are appointed by the testator to ensure that his or her wishes are carried out. A will also names a guardian to raise any surviving minor children after death.
The challenge of a will’s validity by heirs in probate court.
The calculation used to determine income as a percentage of the investor’s capital investment.
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Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Neither OneAmerica Securities, the companies of OneAmerica Financial, Hortin Financial Group, nor their representatives provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor.
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