Wednesday, September 12, 2012
Gena Bigler: Spontaneous acts of kindness can sometimes cause more harm than good
From time to time I see fliers for benefit concerts or other events to help someone in need, usually for medical expenses or related costs. Sometimes it is a can by a cash register for change. Whenever I see these, I wonder if the organizer has thought through the impact of the donations. I wonder if the money collected will help the person in need or further complicate their situation. Sometimes even $2,000 can mean an end to desperately needed government benefits.
The call to act when we see someone in need can lead to spontaneous acts of kindness that can cause more harm than good. Planning is especially important, but often overlooked, when someone is living on the cusp of financial hardship. When faced with disability, a person’s long-term health may rely on qualifying for government benefits. An unexpected influx of cash can cause more problems than it solves.
With some thought and planning, there are ways to ensure the money collected benefits the person in need. One way is to directly pay for things they need like added medical therapies or adaptive equipment that isn’t covered by benefits. This can be effective if there is a clear goal, like a van with a lift for a wheelchair. Another way to ensure they benefit is to place any cash given for them in a pooled or special needs trust. This is especially helpful if their needs are ongoing or less defined.
Both trusts when properly set up are considered exempt from assets when qualifying for Medicaid or Social Security disability. If the beneficiary is disabled and can’t work, social security is there to cover basic needs like food and housing. Social security benefits are not excessive, very little if anything is left after basic needs are met. This is where a trust can be helpful.
The trust can pay for things that improve the quality of life for the person in need. For a woman confined to her bed, it could mean something as simple as fresh flowers once a month to brighten her room and remind her of better days when she could still stop and smell the roses. For a paraplegic child, it could mean having an adapted bike that allows him to experience the childhood rite of learning to ride a bike.
Money given to people in need can cause them to lose their government benefits. If that happens, any cash they received must then be used to pay for their basic needs until they can re-qualify for benefits. The cash that well-meaning family and friends have donated essentially takes the place of the lost benefits until it is depleted. The person in need doesn’t receive any real benefit from the gift and can struggle to get by until they are able to re-qualify for Social Security.
Parents, grandparents or other family members may contribute to a trust for the benefit of a disabled person or child. A trustee manages the funds. The trustee determines how the money will be spent, directed by guidelines that allow the beneficiary to maintain social security benefits.
Trusts not only protect benefits but can help protect the person from themselves or well wishing but misguided friends in their lives. Even a few thousand dollars can sound like a lot until you think about how long it needs to last for someone who can’t work. Since a trustee or committee of concerned advisors direct how the money is spent protections can be built into a trust.
Besides change collected from strangers in the checkout line or large public benefit events, you can fund special needs trusts with annual gifts, life insurance policies or by directing property to the trust in a will. There are a lot of reasons to explore a trust if you want to help someone who is disabled. A properly written trust can prolong the benefit of any money or assets used to fund it and dramatically improve the quality of life for its beneficiary.
Gena Bigler is passionate about public service and credits her time serving nonprofits in AmeriCorps and Volunteers in Service to America (V.I.S.T.A.) with teaching her extreme budgeting and bargain shopping. Gena is now CFO of McNay Settlement Group and serves on the board of the Lactation Improvement Network of Kentucky (L.I.N.K.). Gena would be happy to hear from you at firstname.lastname@example.org.