NJ.com’s recent post, “LTD insurance explained,” says that it would help if workers became more familiar with and signed up for long-term disability (LTD) insurance. Many workers think their short-term disability coverage will be enough—but it only covers them a year or two. Those working at large companies often are offered group LTD coverage. However, many fail to sign up for it even though it’s not that expensive. Younger workers really need LTD. The chances of disability for younger, more active people is much greater than for more sedentary older folks. Their young families would have many years ahead of them without a paycheck, if they were to become disabled.
LTD insurance is income-replacement. Most LTD policies provide about 60% of earned income each year from the time of disability through age 65 or until Social Security Retirement Benefits begin. Just signing up for LTD coverage is only half the story. Make sure you understand the exact conditions under which your particular group LTD insurance will pay benefits. Your disability prevents you from working: in your current specific occupation ("Own-Occ"); or in any occupation ("Any-Occ").
Social Security Disability Income (SSDI)
It is quite difficult to qualify for Social Security Disability Income (SSDI). Once benefits begin, maintaining it can also be difficult. Those with a disabled family member who is collecting public assistance for their living expenses want him or her to inherit their assets at their death. However, they also want to be sure that public assistance won’t be interrupted and will continue to provide for their disabled loved one. An inheritance might disqualify the disabled individual from public assistance. They also may worry that they won't be around to support him or her. The solution is to modify their will to include a "Special Needs Trust." This solution accomplishes the following:
- Leaves assets to benefit a disabled loved one to cover extras like a special educational program;
- Ensures that a trusted person will be in charge of those assets;
- Ensures that public assistance received by disabled loved ones will continue to provide for their routine maintenance and support and won’t be affected by inheritance; and
- Eliminates worry about the future subsistence of disabled loved ones.
This is accomplished by going to an estate planning attorney with experience in creating these types of trusts.
Some states are beginning to consider "ABLE Accounts,” which are similar to 529 College Savings Plans. With ABLE Accounts, families can save up to $14,000/year or a maximum of $100,000 before the federal benefits are affected. Right now, five states offer their own ABLE account programs.
All workers—particularly younger workers with children—should learn about how long-term disability (LTD) works and make sure that they have the proper coverage in place.
Reference: NJ.com (January 22, 2017) “LTD insurance explained”