← White Coat Investor Podcast
White Coat Investor Podcast
WCI #396: Financial Planning For Special Needs Kids with Dr. Bryan Jepson
00:57:14
Today we are talking with practicing emergency physician and financial planner, Dr. Bryan Jepson. Dr. Jepson shares his journey from emergency medicine to opening a clinic to help children with autism before finding his way back to the ER and then...
Loading summary
Transcript75 lines
- [00:00]
Dr. Jim Dahle
This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011.
- [00:16]
Dr. Brian Jepsen
This is White Coat Investor podcast number 396 financial planning for special needs kids with Dr. Brian Jepsen this episode is brought to you by SoFi helping medical professionals like US bank borrow and invest to achieve financial wellness. SoFi offers up to 4.6% APY on their savings accounts as well as an investment platform, financial planning and student loan refinancing featuring an exclusive rate discount for med professionals and $100 a month payments for residents. Check out all that SoFi offers at whitecodeinvestor.com SoFi loans originated by SoFi Bankna NMLS 696891 advisory services by SoFi Wealth LLC. The brokerage product is offered by SoFi Securities LLC. Member Finra SIPC investing comes with risk, including risk of loss. Terms and conditions may apply. Welcome back to the podcast. Hope you're well this winter season. We're into December already. I hope you're taking care of any end of year financial planning items you might have. You know, maxing out retirement accounts. I hope you've opened up all the accounts you need to. If not, it's going to be a big rush before the end of the year if you need to do that. Don't forget lots of things actually allow you to do them after the first of the year these days, while it's most convenient to take care of your backdoor Roth during the calendar year, you don't actually have to do that. You can do it into the next year and still get that contribution in place. But let's get things taken care of and keep our financial ducks in a row so we can concentrate on what really matters in life, which is our families, our own wellness, our patients that we're taking care of, and those who depend on us. Our quote of the day today comes from Tony Robbins who said success is doing what you want, when you want, where you want, with whom you want as much as you want. There's a lot of truth to that. We have some bulk book discounts available here at the White Coat Investor. Thank you so much for discussing money and encouraging financial literacy. Some of you I know buy books in bulk and pass them out to trainees or your residents or colleagues or for a special meeting or whatever. We do offer a discount if you're buying 25 or more copies of any of our Books, we will give you a discount on them. Just contact us emailing@booksitecoatinvestor.com we'll give you an even bigger discount if you're ordering more, you know, you're ordering 100 plus or something. We'll give you a bigger discount. We have a really great discussion today. I've got Brian Jepsen coming on here, which I learned after we finished the interview. I have a lot more connections with than I realized I did when we lined up this interview. I'll mention those after we finish the interview. But for those of you out there with family or friends or yourselves who have special needs kids in your family, this is some really important information. So let's learn about a fairly complicated area of financial planning today. Financial planning for a family with a special needs kid in it. All right. Our guest today on the podcast is Dr. Brian Jepsen. Brian Jepsen, MD, also has a master's in finance. He's a chartered special needs consultant. He's a CFP candidate. He works at Targeted Wealth Solutions as an advisor and has also been practicing doc. So welcome to the podcast, Brian.
- [03:22]
Dr. Jim Dahle
Yeah, thanks. I appreciate it. It's fun to be on.
- [03:25]
Dr. Brian Jepsen
So let's introduce you a little bit. I'm going to said a few things about you, but let's talk a little bit about you before we get too far in this conversation. Tell us a little bit about your upbringing and how it kind of shaped your views about money.
- [03:38]
Dr. Jim Dahle
Yeah, it's a good question. So I grew up in Utah, actually. Five boys in our family, middle class neighborhood, actually probably lower middle class if I'm being honest about it. But my parents did not have college degrees. My dad was entrepreneur at heart, but never really was very lucky in his business ventures. And so money was always a bit of a stress for us, especially as I was growing up. I was one of the older of the five of us. And so, you know, we basically had our basic needs met. But, you know, anything extra, we had to find a way to pay for it ourselves. And so, you know, we did a lot of, you know, starting from the beginning, mowing lawns, paper out, working at McDonald's. You know, I worked as a phlebotomist in college, you know, so there was palpable money stress, I think in our house. My parents did their best to shield it from us. And I think for the most part they did. But, you know, I was old enough and aware enough that I knew that they were stressed out about finances pretty much all the time.
- [04:49]
Dr. Brian Jepsen
So, you Got out of the house at that point. And where'd you go then for your education and training?
- [04:56]
Dr. Jim Dahle
So I went up to the University of Utah and so my parents were always very supportive in terms of education and just helping us to really achieve our goals and you know, know and helped us get scholarships and grants and you know, so I was able to get through undergraduate without any debt and then, you know, ended up going to medical school at University of Utah as well, which is a state school for us. So that helped a lot financially as well. You know, my debt certainly wasn't as big as it could have been coming out. And so yeah, that's kind of how I, how I grew up. You know, I think I've always had a saver mentality based on my parents frugality, but also sometimes it's kind of a scarcity mentality and I've had to, you know, I can, I can see that myself and that's part of who I am and I trying to overcome that a little bit.
- [05:50]
Dr. Brian Jepsen
Yeah. Now you've had an interesting career since you finished your training. Tell us about some of the evolutions your career's had. I mean some docs, you know, I've met a number of docs that have become advisors at some point in their career. But tell us how that career path went for you.
- [06:07]
Dr. Jim Dahle
Yeah, my career is definitely not typical. I mean I ended up doing after medical school I went to residency and emergency medicine in Grand Rapids, Michigan. Pretty much came out of that with the standard future ahead of me in emergency medicine. I got a job in Colorado and it was a good job and everything was going along at that point. That's when I got like a lot of your listeners. That's when I became really interested in personal finance. This is way back when I'm a little long in the tooth, you know. So this is back back in the 90s, the 1900s, but last century. Last century. So as I started practice, very interested in personal finance. Was just reading everything I could. There wasn't a white code investor blog at that point. You know, it was.
- [06:57]
Dr. Brian Jepsen
Sorry about that. I didn't know enough as an undergraduate to start it.
- [07:01]
Dr. Jim Dahle
But anyway, you know, I mean there were some websites and some, I read a lot of books and just you know, got invest or interested in investing and real estate and all this kind of stuff that a lot of your listeners are interested in as well. But then, you know, my life took a hard right turn about two and a half years after I got out of residency. So I hadn't been Going for very long. We had actually decided at that point to move back to Utah because that's where all of our extended family was. And so I moved back to Utah. You know, you will know Jordan Valley Hospital, I worked there. But about two and a half years in, like I said, that's when my second son was diagnosed with autism. And at that point, you know, everything changes. You know, for parents when you. When you have that come into your life, you know, your focus immediately goes to different directions. And that's definitely what happened to me. And, you know, as my wife and I tried to figure out what we were doing and what autism was and how to help our son, we did everything that we could to figure out what resources are there, which were a lot less back then than there are now. And part of that for me is that I started looking into the biological side of autism and seeing what research shows and what I could understand about that, which led me to. Eventually, I opened up a clinic in Utah, just a nonprofit clinic. It kind of led me towards some integrative and functional medicine practice. So I did that while I continued to work in the ER full time. Ultimately, that led me to going moving to Texas to be part of a bigger multidisciplinary clinic that I helped to found. So I actually left emergency medicine at that point in did kind of functional medicine for autism for about five years full time. And that was in Texas. But while we were there, we decided to adopt another child who also was severely impacted by autism, which was a decision of the heart, but was also really difficult as we kind of had now two kids with significant special needs. And also our oldest son, who we were trying to, you know, kind of make life not completely about autism for him and let him have his own. His own life. And so. But, you know, unfortunately, at that point, I was 24. You know, I mean, I was basically 24. 7. Autism. Right. So I was working in an autism clinic. I was lecturing all over the place, talking about just autism treatment and then home with autism. And, you know, so it was pretty stressful for our family. And so I went back to the ER to decrease stress. But, you know, and also because of just for our own financial futures. I mean, you know, that kind of medical practice certainly isn't highly reimbursed and definitely not compared to emergency medicine. And now that I had two kids that were going to likely have lifetime support, I decided I just need to go back to ER and focus on our family and our own financial future. So. So that's what I did, you know, which is. Was not an easy thing after five years out, but made it back in and you know, been doing it ever since. We ended up moving back to Colorado and ironically back to the same job that I came out of residency two initially. And you know, but for me, about, I don't know, four or five years ago, I, I could kind of see the writing on the wall. For me, you know, in terms of, call it what you will, burnout or just being feeling stagnant in the career or just tired of nights and weekends and holidays or, you know, there's lots of reasons. I think docs kind of start looking around a little bit. But I started doing that and said, okay, well, you know, I mean, I was in a decent place financially, but I'm not ready to mentally hang it up and just retire. So I kind of looked back and said, okay, well what if I were not a doctor? What would I have enjoyed doing? And you know, really finance was something that just really interested me. And so at that point I decided that I wanted to dive in deeper on the academic side of it. Went and got a master's in finance and risk management, you know, and part of that is just so that I could really learn the nuts and bolts. But part of it too is I figured that that would help if I, for me to find any kind of employment in that field since I'm coming from a completely different background. So I did that. And then finance is very broad and trying to figure out, okay, well, what am I going to do? Within finance, I really kind of migrated toward financial planning. Started this certified financial planning process and met targeted wealth, which I can thank you for because they were listed on your blog as one of your vetted companies. And you know, so I reached out to them and I really thought that they were, they met all the criteria that I was certainly, I was looking for in a place to work. And you know, a lot of the criteria that you have listed as a good company to look for, you know, for a financial advisor, you know, including, I mean, fee only and low cost. I mean, we're definitely on the lowest end of your range of appropriate fees and, you know, philosophy of low cost investing and you know, just all the stuff that I thought was important I found in them. And so, you know, one thing led to another and they hired me and here we are.
- [12:50]
Dr. Brian Jepsen
Very cool. Now you've got a designation that not very many financial planners have. This chartered special needs consultant. Tell us about that, what that covers, what that took to get that I Mean, is this one eight hour class or what does it take to get this designation?
- [13:04]
Dr. Jim Dahle
Yeah, it's more than that. So it's almost like a semester of school essentially. You know, I mean, there's, there's three different classes that, that each take, you know, six weeks or so, I think, to get through them. And, you know, you have to go through those three and then take a test at the end, you know, so I pushed through it pretty quickly. You know, a lot of it I felt very comfortable with, you know, because a lot of it is teaching about how to communicate with disabled people and, you know, I mean, I know all that stuff.
- [13:36]
Dr. Brian Jepsen
Yeah. Having run an autism clinic for years and, you know, aside from your work in the ER and having a couple of kids with special needs, I mean, I can't think of anybody that might be more qualified at this point to talk to people about special needs.
- [13:51]
Dr. Jim Dahle
Yeah, so I pounded through that part of it pretty quick, but the rest was just really kind of diving in on all the nuances of the financing and of special needs families.
- [14:01]
Dr. Brian Jepsen
So, yeah, we're going to talk quite a bit about, you know, finances with special needs families. Before we get to that, though, as a physician turned financial planner, what surprised you the most about working with docs as clients?
- [14:16]
Dr. Jim Dahle
Ah, good question. You know, to be honest, it's the docs that are not my clients that surprise me the most. Meaning, you know, I'm constantly surprised at how many doctors don't pay attention to their finances. Right. They just, they just don't pay attention or, or they act on bad advice without due diligence. You know, so, I mean, it takes you a lot of effort to get to where you are. And where you are is a great opportunity to become financially independent. Right. I mean, as a high income professional, you should be on the path to, to financial independence. And so why doctors don't pay attention to that is just that that's what surprises me more than anything. You know, I like how you kind of designate different pathways, I guess within, you know, that doctors can take, whether it's, you know, a delegator or a validator or a DIYer and I'm fine with any of those, but just choose one of them, you know, do something, do something. I mean, I get the DIY thing. I'm a DIY to the nth degree to the point that I became a financial planner. Right. I've never actually used a financial planner myself. You know, I went to a master, get a master's degree instead. So I get the DIY but if you're going to be a DIY guy, be a good one, right? You know, actually do the research, take the time, put the effort in so that you know what you're doing, and if not, then get some help. But do something.
- [15:49]
Dr. Brian Jepsen
Yeah. So what do you think is the easiest way for somebody, you know, in the beginning to tell if they're a delegator, a validator, or a DIYer?
- [15:58]
Dr. Jim Dahle
I would say if you have an hour of extra time, how do you spend it? You know, if you're, if you're a DIYer in finance, you're probably reading the White Coat blog or, you know, you're, you're looking at your stocks or you're trying to learn stuff, you know, and it gets you out of bed in the morning. It's something that you're interested in doing and you love learning about it. That's a good DIYer for me, Validators is you like to learn some stuff, but you don't take the time to fill in all the holes that are out there. And then the delegator is, you know, it is important, but you just have no interest in doing it and you'd rather pay somebody else to do it. The last thing that you want to do with that hour of time is read anything about finance. And so that's kind of how it's almost like the, like, car guys, right? You know, I mean, if, I mean, I just think about it as like, if you want to change your oil, I mean, there's some guys that really love to get their hands dirty and they're going to go out there and try and fix their car and do the oil changes. And then the validators are like, you know, I know that I could save money, but, you know, and I probably should do this, and I can watch a YouTube video and hope I do it right for oil changes. I'm a delegator, right. I mean, I. It's not worth it to me, so I'm happy to pay for somebody else to do it. And so that's kind of how I would use that as a metaphor, probably.
- [17:23]
Dr. Brian Jepsen
That's the beautiful thing about being a DIYer. When it comes to being your own financial planner and asset manager, there is no better paying hobby out there than managing your own finance. Just because the cost of even reasonably priced advice is not insignificant, especially when you start applying compound interest to it for many years.
- [17:42]
Dr. Jim Dahle
Yeah, yeah. And again, as long as you do it well, because there's also a big cost of screwing up.
- [17:47]
Dr. Brian Jepsen
Absolutely agree with you. If you're not going to do it. Well, get some help. You don't have to screw up too badly to blow through $10,000 a year when you have a significant portfolio especially. All right, our subject today is planning for special needs kids. Now, I think we all understand how you got interested in this, you know, between your practice and between your own kids. I don't think that's too much of a mystery there. But let's talk about some of the more specific aspects of it. And I've thought of what I can think of with this. But feel free to throw in additional information that maybe I haven't thought of when it comes to these sorts of planning. But let's talk a little bit first about Medicaid. Medicaid planning for a disabled kid in a high income family. So somebody that's a white coat investor listening to this has a disabled kid in their family, how can they qualify or help their child to qualify for Medicaid? Government programs, et cetera.
- [18:45]
Dr. Jim Dahle
Yeah, I think the first thing to address is why should you try to qualify? Right. You know, you're high income. Do you need to go on Medicaid? You know, I think a lot of us have the presumption that Medicaid is for poor people and you know, for the special needs family. I think you have those families need to kind of get over that and look at Medicaid not as a welfare program, but as an entitlement program. Because it actually is. I mean, you pay into the Medicaid system through taxes, Social Security tax, FICA tax. You know, you're paying into that as kind of an insurance plan in case you get disabled or someone in your family gets disabled. And so I kind of look at it more like it's almost like an insurance, you know, I mean, if you're paying the premiums, why would you not take the payout if you need it? And for special needs in particular, Medicaid's really a lifeline for them to have needs met that become incredibly expensive over a lifetime. Primarily things like, things like housing, vocational assistance, health insurance, you know, extended long term care. I mean, lots of times if we're thinking about long term care for the normal family, most people don't stay in long term care for more than a year or two at the end of their life because they just don't live that long. But you know, once they get to that point. But special needs families or special needs individuals, that's. That could be their entire life that they're needing extra support, you know, and if you're paying that out of pocket. You better have a lot of money because it's going to eat into that really quickly. And the other reason is that some services that Medicaid offers is not even accessible if you don't have Medicaid. So you can't even access it through private pay. And so it really is important for special needs families to maintain that eligibility. And it's a challenge to do that. But let's face it, I mean, raising kids, raising a disabled child is expensive and not just in the things that you have to pay for. There's a lot of opportunity cost also, you know, I mean, like in my house, my wife could never work outside of our home because, you know, she has been taking care of our boys, you know, throughout their lives. And they're, you know, they're in their mid-20s now and will continue to need our full support, you know, and for me, it's not like I could be gone working 18, 20 shifts a month or whatever, you know, I mean, I, and just leave it all up to my wife. And so, you know, I've, I've, I've cut down shifts that I probably wouldn't have if I didn't have this situation. So there's, and I would add to that that lots of times, you know, especially when your kids are young, I mean, that's money that you could be investing, you know, that's going to help your long term future, that you're paying for services for your kids. So, so there's lots of opportunity costs. And there aren't very many special needs families who are so wealthy that they can totally support without any assistance. And you know, there are some.
- [22:04]
Dr. Brian Jepsen
Is it hard to qualify for Medicaid when you, you walk in there to qualify for Medicaid and they're like, what do you make? And you're like 375. And they raise their eyebrows and go, well, you're not going to qualify. I mean, how does that work exactly?
- [22:18]
Dr. Jim Dahle
It's not hard because, well, I mean, I should say this. It can be hard to qualify for ssi. And that's really what the government benefit is, right? So it's Social Security income. And when you qualify for that, Medicaid is an add on. So you're not qualifying for Medicaid necessarily, you're qualifying for ssi. You have to demonstrate disability. And so sometimes it can be difficult if it's not clear what your needs are. And so there are strategies to be able to be sure that you can qualify for that. And one Way to think about that is you have to explain to the people that are qualifying you all the things that your kids can't do, like normal people can do. And as parents, that's kind of hard because we're always trying to encourage them and help them to do everything that they can do. But you have to have a change of mindset when you're trying to get them eligible for Social Security and show them without assistance, without support, they cannot do this. And that's really what SSI is based on, is based on what a typical person can do. And if they can't do that without help, then they should qualify. So that's part of it. So it's getting them qualified for that. In terms of the income side of it, they can't. You know, you qualify your kids for SSI when they become 18, I mean that's the earliest that you can do it. And at that point they're considered adults and so they're not. It's all about their assets, not your assets. So as parents, your assets don't come into play at all.
- [24:03]
Dr. Brian Jepsen
It's not like going to college that way. No, you go to college, the FAFSA wants you to put all your assets on there. There's no equivalent of the FAFSA for a disabled kid turning 18, right?
- [24:13]
Dr. Jim Dahle
Yeah. So it's all about their assets. But that's why it's important to which we'll talk about coming up here is to protect money that you set aside away from them as individuals because that will disqualify them. The limit that they can have is $2,000 in assets and their income has to be less than like, I think it's 1900 or 1970 or something like that per month.
- [24:40]
Dr. Brian Jepsen
But what about before 18? I mean, what do they qualify before 18? Anything or nothing at all.
- [24:47]
Dr. Jim Dahle
So before 18 it is based on the parents income. And so if you as a parent have a very long income and very low assets, then your kids can qualify. Obviously, very few of our, of our listeners would qualify for that.
- [25:02]
Dr. Brian Jepsen
So they qualify for what? SSI or Medicaid or what?
- [25:06]
Dr. Jim Dahle
Both.
- [25:06]
Dr. Brian Jepsen
Both. Okay. Based on your assets.
- [25:08]
Dr. Jim Dahle
Yeah. So yeah, up until 18 is the parents assets, after 18 is the child, it's the child's assets. Now there are exceptions. I mean there are some things, you know, some conditions that have really high medical need, you can qualify for Medicaid in spite of parents assets. So there are exceptions. But you know, for the most part it's, that's the delineation is the age of the kid in 18. So 18 is actually a really important pressure point, if you want to say it that way, for special needs planning.
- [25:43]
Dr. Brian Jepsen
What other government assistance is out there besides, you know, either from states or federal government for, besides SSI and Medicaid?
- [25:51]
Dr. Jim Dahle
Well, so, you know, there's some of the other entitlements would include vocational rehab, you know, so that's something that if you qualify for ssi, they can still help you find a job and get job training. And some of that includes money for education. So as an SSI disabled qualifier, you can actually get your college paid for, you know, because the hope is that they will be able to come off of Medicaid at some point, you know, if they're able to support themselves. And so there's a lot of job training, things like that. If you have ssdi, so that's based more on either your parents, you know, if your parents have retired or are deceased or are themselves disabled, then the child qualifies for ssdi, which is Social Security disability Insurance that does not have an asset limit. And then you become qualified for Medicare in that situation. So, so there's that. And plus, you know, a lot of the states have waivers, you know, which are Medicaid, Medicaid based waivers which can help pay for all kinds of things, you know, so like day programs for adults or you know, a respite care or you know, like a personal assistant to help them go do stuff or whatever, you know, so, so there, there are a lot of other benefits that some of them are paid for by the state and are not entitlement. So it all dep on the state you live in and how much money that state is putting into that program. And some of them are federally mandated entitlements.
- [27:29]
Dr. Brian Jepsen
What about charitable or nonprofit organizations that can help in these sorts of situations? Are there any that you think of as go to organizations that every parent ought to know about?
- [27:42]
Dr. Jim Dahle
Well, you know, honestly it's kind of disability dependent, you know, because each disability kind of has their own advocacy organizations, you know, for autism. There's one called the Autism Resource center, which is ARC for short. There's the Autism Society of America. You know, there's a bunch like that that are really, that are strong advocacy groups, you know, and every, like I say, every disability that has a name to it will have something similar to that. And it's a really good resource for people to do that because I mean, generally they're, they're parent driven organizations or you know, just people that are very focused on that and they can really guide you towards the kind of resources that you need. Because as a parent, especially as a new parent, it's overwhelming, emotionally overwhelming, just trying to figure it all out, knowing what to do. You're in a totally different world than you ever thought you'd be. And so I definitely encourage people to reach out to find the applicable organization because they can help you also with finding the resources that are out there.
- [28:48]
Dr. Brian Jepsen
Yeah. Now this $2,000 limit, you know, age 18 and $2,000 and 1900 or whatever it is in income and I think there's probably a little variation by state there. This becomes very important when it comes to planning for this now adult child's future. So there's a lot of tools that can be used. Can you tell us a little bit about the best way to use each of these as you try to stay under those limits of assets so they can still qualify for SS and Medicaid? Let's start with a relatively newfangled tax protected account, the Able account. How should those be used?
- [29:24]
Dr. Jim Dahle
Yeah, you're right. I mean in order to save for your kids future, you have to be able to earmark assets for them and it can't be under their name, you know, so you have to. I mean the main ones are the Able account and special needs trusts. And there's some nuances and there's some differences and pros and cons of each. So the Able account is basically started from a law. It's called the, I think it's the ABLE act. And ABLE stands for Achieve a Better Life Experience. So Achieve a Better Life Experience Act. And that, that was passed in 2014. It took a couple years for states to get the funds going, you know, but over time most states have added it. There's, I think there's still a couple that don't have Able accounts as part of their state. It's usually administered by the same program in the state that 529s are administered in.
- [30:18]
Dr. Brian Jepsen
Which is cool because presumably that means they're now competing with each other the way 529s have to have better accounts.
- [30:24]
Dr. Jim Dahle
Yeah, exactly. Yeah. And that brings up a good point because you don't have to use your state's Able account. I mean, you can look around and find the ones that are the best. But unlike 529s, you can't have more than one per individual, you know, so for 529s, you can have as many 529s for that beneficiary as you want. And as many people can contribute to it as you want. As you know, as long as each individual contributes less than the gift tax limit, that's fine. But with able accounts you can only have one per beneficiary. There is a limit about how much you can contribute to that account regardless of who's contributing. So, and that's 18, current this year is 18,000. You know, it's the gift tax limit, but you can't have grandparent contribute 18 and you contribute 18 or whatever. It's 18,000 total and which is different than 529s. So you have the 18. Now the individual can also contribute some if they have a salary. So if they are working, they can contribute to the able account up to the poverty limit, which I think this year is something like 15,000, a little over 15,000. So they can contribute as well.
- [31:38]
Dr. Brian Jepsen
They can contribute 15,000 or they can contribute some money up until they're making.
- [31:42]
Dr. Jim Dahle
More than 15,000, they can contribute up to the poverty limit. So they could contribute up to 15,000 per year in addition to the 18,000 that someone else contributes. And so, you know, the good thing about that is that that money does not count as an asset to the individual in terms of their government eligibility. And so it gives them an opportunity to spend money on pretty much anything as long as it's for the beneficiary. It's a very broad definition of stuff that you can spend it on. And it's basically kind of like your529 where you can have a debit card, you can write a check. It gives them a lot of independence, it's easier, you don't have to have a trustee. It doesn't cost any money other than maybe just a minimal setup fee in some states, you know, so there's a lot of advantages to it. But there's also some qualifiers, you know, so you can only if you have more than 100,000 in that account, it does start counting as an asset until you spend it down below that. And you can, you can't put more than the total like a 529 limit, which is usually 4 to 500,000. That's the most that you can ever contribute to enable. And so if you have, you know, so that may not be enough to last your lifetime, you know, so you may need a special needs trust to build up kind of a larger asset base. But you know, it's a good mechanism I think to just kind of help the day to day spending.
- [33:17]
Dr. Brian Jepsen
Now there's a weird rule with able accounts that doesn't apply to very many other tax protected accounts. And I don't think this has been changed. I think this is still in place. But if there you really want to spend the whole thing during your life because if there's anything left, the government can claw it back to reimburse Medicaid. Right. If you die and still have money in the account.
- [33:38]
Dr. Jim Dahle
Yep. And so that is, that's one of the downsides for sure. You know, it's the Medicaid payback provision. Now some special need trust, special needs trusts have that as well. A first party special needs trust, which we can talk about in a minute, that also has Medicaid payback provision. Some of the states are doing away with that with the Medicaid payback for ABLE accounts. And some of them have it but they don't enforce it. And so the problem is that if you live in a state that has a Medicaid payback provision and your able account is in a state that doesn't, you still have to pay it back because it's based on the state where you live. The Medicaid payback provision is. And so yeah, ideally you spend that down, you spend that down before they die, you know, because after they die, that money first pays back what they've been charged in Medicaid from the time that the ABLE account was started. So it's definitely one of the downsides.
- [34:38]
Dr. Brian Jepsen
Now you might be allowed to get, you know, your, whatever your state's 529 total limit is, you know, 400, $500,000 in there. But my understanding is a lot of states start counting it as the beneficiary's assets once it gets to $100,000 or so.
- [34:54]
Dr. Jim Dahle
That's right, yeah, over 100,000, that's it. It's an asset at that point. And so you would lose your ssi. You may still have, you know, lots of times you can lose your SSI but not lose your Medicaid. So you may still have Medicaid option for a while. But ultimately if you need that SSI income, then you need to spend it below a thousand, you know. And that being said, SSI income, there's not, it's not that much. But yeah, you would have to spend it down. Just one other thought on able before we move past that. I mean if you have a 529 account, you know, like you have a child that you've been saving a 529 for and they become disabled or you determine that they're not going to be eligible for or you know, they're not going to be able to go to college because of a disability. You can actually roll over 529money to an able account, but it's limited. You know, you can only roll it over 15,000 per year or whatever the, you know, the maximum contribution. So every year. But, you know, if you plan ahead and you kind of know that they're unlike that, they're more likely to need an able account than a 529, then you can start rolling that over before they're 18. Because 529 count as an asset for disabled kids.
- [36:13]
Dr. Brian Jepsen
Didn't secure Act 2.0 change 1 of the able account rules too. Something about used to not be able to contribute if they weren't disabled before age 26 or something. Didn't something change there recently?
- [36:24]
Dr. Jim Dahle
Yeah, good point. So an able account initially needed, you needed to be disabled before age 26. So starting in 2026, they've changed that to age 46. So, you know, people that are disabled as adults can still contribute now. So, yeah, that's a good provision.
- [36:42]
Dr. Brian Jepsen
All right. I think we've beaten the able accounts as much as we can. Let's talk about the special needs trusts. Different types when you might want to use those instead of an able or in addition to enable.
- [36:53]
Dr. Jim Dahle
Yeah, so basically there's a couple of main types. One is a first party trust and one is a third party trust. And the difference is where is that money coming from? Whose money is it? So if it's the disabled person's money, then it needs to go into a first party trust. So for example, if there was a legal settlement and they got a big payout from that, but it came to the individual in the individual's name, it's that person's money. But that would immediately be an asset and immediately disqualify them from government benefit. And so you can create a first party trust for that money to go in. That would protect that money. So the downside of a first party trust is that there's a Medicaid payback provision, you know, so if it's not spent down, all that extra is paid back to the state for the Medicaid services that they have used. If there's anything left after that, you can, you can do give it to a, you know, secondary beneficiary. First party trusts are a little bit more expensive to set up. You know, they usually require, you know, like a corporate trustee. And so there's a little bit more, you know, and sometimes it's actually the court that mandates it, you Know, and so it's more of a legal process if you don't have that much money to really actually kind of make it worth it. There's something called a pooled trust where it's basically run by a nonprofit organization that a bunch of people pool their money together. They have a joint trustee, they take care of. You know, I mean, it's an individually marked account. But, you know, they, they pay like they would out of a regular special needs trust. But when that, when that person dies, often that money goes into the pool, you know, to help other disabled people rather than Medicaid, even though Medicaid can access some of it, especially if there's anything left over. So that's. Those are first party trusts. Third party trusts are what most people have and most people think about from a special needs planning perspective. And that's money that's not the beneficiary's money. It's money that parents put in or grandparents put in or whoever puts into the trust on the behalf of the disabled person. So basically the benefit of that is that you have a trustee. You have to designate that person who can kind of help. Well, it's their job actually to ensure that that money is going to the beneficiary in a way that makes sense. It's a supplementary trust that's important is that it has to be supplemented, a supplement to the government provisions. And the wording on that is actually quite important, but the trustee is in charge of paying that out on behalf of the beneficiary. So the good thing with third party trusts is that there's no payback provision and that there's no maximum amount that you can put in. So you can have as many people put money in there as much as they want to, and after that individual dies, you can have secondary beneficiaries that get the extra money. So, you know, a lot of people do this for their family, you know, where they put the amount that they need for their special needs child and then list their other children or grandchildren, whatever, as a secondary beneficiary. And so it flows through to them. So I think that's really the biggest benefit, you know, and to ask, to kind of figure out, okay, should I do an able or should I do a special needs trust? One of the other downsides, I guess, of a special needs trust is that there are certain things that you can't pay for without losing some of your eligibility or at least some of your SSI income. So if you pay for housing out of the special needs trust, that comes out of your SSI check. So you don't get as much SSI for supplementing their housing. You can do that through an able account, though. And so what some people do is they pay the able account from the special needs trust and then the able account pays the housing. So there's ways that you can kind of use them together. The other thing is they're a little bit more cumbersome to administer. I mean, you have to have a trustee, you have to pay, file tax returns. You know, there's, there's taxes owed on income in the trust. You know, for that reason, some people don't, don't fund it until their death, you know, so like the parents, it's a testamentary trust, so it's not funded until they die. And then they don't, you know, don't have to kind of administer it throughout their life. But I mean, there's pros and cons of each. You can't do it either way.
- [41:36]
Dr. Brian Jepsen
What are typical amounts that, you know, a doctor family might put into a trust or an able account in your experience? I mean, you put $100,000 into an able account and a few hundred thousand dollars into a trust and call it good. Or are people, you know, leaving millions behind in these trusts?
- [41:56]
Dr. Jim Dahle
You know, I mean, that's, that's where the special or the financial planning part of it comes in. Because part of that is how much faith you have that those government benefits will be around for your kid's lifetime. You know, and some families feel pretty strongly that feel that that's, they feel pretty safe about it and some don't. And so, you know, to figure out how much to put in, you really have to figure out about what, what their expenses are and what kind of life and supplement that you want for your disabled child. And you know, that's going to be family independent. But in general, I mean, some people, yeah, it's a couple hundred thousand. Some people it's millions, it's a couple million. And so part of what I try and do is put the pieces together. I mean, from a financial planning perspective, the most important thing is to be sure that the parents plan is in good shape. It's kind of like the oxygen in the airplane idea. If you're not taking care of yourself, you're not going to have much left for anybody. And so we try and be sure that we do a comprehensive plan for the parents first, and then we start looking at what their needs are. And everybody's disability is. There's a wide range of needs and expenses. So you really have to kind of figure out what you want their life to look like and then figure out how much you expect that to cost and then project that forward. And you know, it's, it's. I mean, part of that is investment returns and, you know, kind of just figuring all that stuff out.
- [43:34]
Dr. Brian Jepsen
Yeah. Do they tend to fund that, you know, at death or well before death or what's kind of typical there?
- [43:41]
Dr. Jim Dahle
You know, I mean, I've read different things from different, from different sources where some people feel strongly just funded at death and some people feel strongly that they'd rather fund it as a living trust. I think the benefit of doing it as a living trust is that you can kind of practice with it a little bit. You know, you can be sure that the trustee kind of has a sense of how to do it and you can start fun and stuff, you know, while you're alive with them. You know, whether it's take them on a vacation or stuff like that, you can pay that out of the trust. So really anything that helps your disabled child, you can use the trust to pay for it. And, you know, so there's lots of things that families would want to do and use the trust for that. So it's just, you know, I think every family is a little bit different on that.
- [44:32]
Dr. Brian Jepsen
Yeah. Now, you've been around this long enough, both in the financial space as well as in the medicine space, that you've seen how whole life insurance salesmen are looking for any opportunity possible to sell a whole life insurance policy. One of which is, hey, if you got a special needs kid, you know, that's a great reason to buy a whole life policy. What do you see as the role of a permanent life insurance policy in a family with special needs child, if any?
- [44:58]
Dr. Jim Dahle
Well, I mean, it's a good question. And let me start by saying I have no skin in the game, you know, I don't sell insurance, so. And I agree with you for the most part, you know, just in terms of your philosophy with regard to life insurance and you know, term is the way to go for the vast majority of people. But, you know, if you think about why you buy insurance, I mean, we buy insurance because you're transferring risk. Right. I mean, that's basically what insurance is, is a risk transfer. And you know, for life insurance, the risk that you're transferring is the risk of dying too soon before you have money to finance your family. Right. So most doctors, we suggest that they buy term insurance because, you know, by the time their term is done. Hopefully they're going to be financially independent enough that they can self fund that risk and so it's no longer needed. But you know, for special needs families you have to remember that you're, you're planning for two generations and you know, and so it's, there's, that risk extends beyond the typical doctor family. And so if you get to the point where you are planning and you don't have the resources that you feel like you can fund that risk, I think that's when insurance is reasonable or not just reasonable, a good idea. You know, one of the, I guess maybe benefits of having a whole life policy is that your risk is just extending and you know, and if you end up at an older age and realize that you still don't have enough money to fund your kid and then you're into a pretty big term premium as an older age. But for me I can see some value in it. But I would probably do a second to die policy because it's cheaper, the premiums are less and if you do a universal policy, you may be able to pay in for 10 years and then just have the cash value pay the premiums that long term plan to fund your special needs trust that could kind of, that will die with you. And so that's, that's, I think that it's not completely unreasonable and it's not unreasonable as a, as an estate planning tool. Also, you know, if you have a grandparent or somebody that wants to fund a special needs trust through an insurance policy, they pay the premiums and you know, can kind of leverage their gift. So I don't think it's crazy.
- [47:35]
Dr. Brian Jepsen
Have you bought a whole life or other permanent policy to help fund your children after you're gone?
- [47:41]
Dr. Jim Dahle
So I actually did buy a second to die policy and that, but that, you know, that was before I was a financial planner. You know, I was working on just trying to get our estate set up to help with, you know, setting up special needs trust and all this kind of stuff. They talked to me about a special or second to die policy and at that point I felt like I wanted to kind of be able to transfer that risk. So we bought a second to die policy which I'll probably, probably be able to stop funding after a total of 10 years.
- [48:12]
Dr. Brian Jepsen
But you're still happy you got it?
- [48:14]
Dr. Jim Dahle
I'm not unhappy. I mean it's one of those, I'm.
- [48:18]
Dr. Brian Jepsen
Hearing a little bit of mixed feelings about it.
- [48:20]
Dr. Jim Dahle
I have mixed feelings because it's one of those things that ultimately if I live long enough I'll be able to self fund it. So the reason to do it at that point would be at that point I didn't feel like I was there. And you know, so the gamble that would been, okay, well another term policy for however long it would take. And that's a very reasonable thing too, but is what it is, I'll probably hang on to it.
- [48:51]
Dr. Brian Jepsen
What else should parents with special needs kids know that we haven't yet talked about?
- [48:57]
Dr. Jim Dahle
Well, you know, I think a lot of it is there's a time frame for everything in special needs planning. Right. You know, I mean, and it really fits in their pressure points along their life, you know, so like when you're first diagnosed, what you're focused on as a parent is different than when they're 18 and when they're after age 22, it's different than when they're 18 because that's when they age out of educational assistance programs through public education. And you know, as you're an older parent, you've got to, you know, kind of start thinking about, okay, well what's going to happen to them, where they're going to live, you know, if we're not around anymore, you know, so there's a lot of things that special needs families have to think about that, you know, I mean that what most families, it's, you know, plan for your own retirement, you know, help your kids get through college and then, you know, it's whatever you have left over is great. You know, it's, it's so it's a little bit different because again, you are planning for another generation. And so there's, there's just, there's nuances and there's just a lot of landmines. I mean, that's the biggest thing. I mean there's, it's so easy to lose benefits. And I'll tell you, I can speak from personal experience. Medicaid is our Social Security is watching. They are keeping track of your assets. You know, like I had a couple of months where my son had $2004 in his account and they came back and he lost his benefit for that month. And you know, so it's just stuff like that on top of just trying to kind of get through the day to day of being a parent of someone with, you know, those kind of needs. It's, there's a lot to keep track of. And so I mean, I would just encourage everybody to, you know, get the help that they need to at least learn the process and get on a.
- [51:01]
Dr. Brian Jepsen
Good path for that, yeah, it's complicated financial planning, isn't it?
- [51:05]
Dr. Jim Dahle
It is. It's different. It's different. You know, it adds a whole, a whole different element because you have to do all the other stuff too. You have to do all the other stuff too to be sure that you're in good shape and most of the time you have other kids to take care of too, you know, so it's, you know, there's a lot to it for sure.
- [51:22]
Dr. Brian Jepsen
Well, it has been wonderful to learn more about how to take care of special needs kids, how to do financial planning for a family with special needs kids. We've been talking with Dr. Jepsen, who is not only a practicing emergency physician who has taken care of autism kids in an autism specific clinic, but also for this discussion, a chartered special needs consultant and available at Targeted Wealth Solutions, one of our long term advertisers that we've had here at the White Coat Investor. Thank you so much for your time today, Brian.
- [51:54]
Dr. Jim Dahle
Yeah, you bet. Can I just add one other thing?
- [51:56]
Dr. Brian Jepsen
Yep.
- [51:57]
Dr. Jim Dahle
You know, in terms of, just to help with special needs families, I mean, you know, one thing that I like what you say to doctors is, you know, often that you introduce your blog or your podcast as, as thank you for what you do, you know, because we don't hear that enough. I think special needs families need that too. And you know, it's, it's tough. It's, it's a tough, it's a tough life and there's a lot of challenges and there's a lot of things that you have to do and it's isolating and, but to those families, first of all, thank you for what you do. Second, enjoy the journey. Try. Because, you know, these are, these are special kids. And you know, I have obviously a personal soft spot for them. But, you know, this is, they will change your life in a good way. And, you know, and if you're a doctor that are helping with them, just take a few more minutes with these families, just take a little bit more time, you know, smile, help them just understand that they're, they may be having a really bad day. And, you know, anything that you can do can make a huge difference in their life. And so I'll just add that.
- [53:19]
Dr. Brian Jepsen
Yeah, well said. You know, it's challenging to be a caregiver for a year of your life. You know, when we're talking about doing it for multiple decades, it's, it's a whole other level of commitment and challenge and difficulty. So thank you, those of you out there taking care of especially needs people, whoever they may be, whether they're kids or whether they're now elderly, we all need a little bit of help in this life. Some of us might need a little more help than others. And thank you for those of you out there giving it.
- [53:46]
Dr. Jim Dahle
Okay, perfect.
- [53:49]
Dr. Brian Jepsen
All right. I hope you enjoyed that. I discovered after, during and after the interview that Brian used to work in my group. So he knows half of my partners, all the partners in my group that are older than me, he knows. And so a fun connection that we've had to be able to, you know, know a lot of the same people and work in the same place actually for a fair number of years. So thank you, Brian, for what you're doing out there, not only, you know, in emergency medicine and with your financial planning practice, but for your own family. You've done a great service. For a lot of people out there that need help with this complicated area of financial planning, don't forget about the bulk book discounts. We have available. Email booksitecoatinvestor.com if you'd like to order 25 + books. We'll give you a discount on them and help you get the word out to other White Coat investors. Potential White coat investors. People who just need to become more financially literate, more financially disciplined so they can concentrate on what matters in life. Thank you. For those of you who've been telling your friends about the podcast, I cannot tell you how important this is. Please send them a link to a podcast that you think will help them. If you know someone with a special needs kid, please send them a link to this podcast. This is how White Coat Investor has grown more than any other way over the years. Yes, we try to buy ads every now and then. We even tried advertising in the hospital once. That didn't work so well. But you know what does work well? It's just people telling others about something that's worked really well for you. So if we've helped you, please pass it on to somebody else, pay it forward, you might change their life. Especially if people get this information early in their career, it can be worth millions to them over the course of their life. That's a very generous gift you're making to people. Another way that helps us spread the word is just to leave five star reviews for the podcast that helps more people find the podcast. A recent one came in that said, thank you. I'm so grateful for all this podcast has taught me. I've been listening since I was in residency about five years ago. And the impact WCI and Dr. Dali have made on my personal and financial life has been profound. Thank you for all you've done for my family and I. That comes from DICWM6 so thank you for that five star review. It really does help us get the word out. All right, as I mentioned at the top of the podcast, SoFi is helping medical professionals like US bank borrow and invest to achieve financial wellness. Whether you're a resident or close to retirement, SoFi offers medical professionals exclusive rates and services to help you get your money right. Visit their dedicated page to see all that SoFi has to offer@WhiteCodeInvestor.com SoFi one more time. That's WhiteCodeInvestor.com SoFi owns originated by SoFi Bank NA NMLS 696891 Advisory Services by SoFi Wealth, LLC. The brokerage product is offered by SoFi Securities, LLC. Member Finra SIPC. Vesting comes with risk, including risk of loss. Additional terms and conditions may apply. All right, we'll see you next week. Until then, keep your head up, shoulders back. You've got this. We're here to help you join the White Coat Investor community. Help everybody else to become successful along the way. This is my financial Planning might be a single player game, but that doesn't mean you can't get a little help from your friends every now and then. See you next week.
- [56:54]
Dr. Jim Dahle
The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.