Special Needs Planning
Americans are living longer than they did in the past, including those with disabilities. According to one count, 480,000 adults with intellectual disabilities are living with parents who are 60 or older. This figure does not include adult children with other forms of disability nor those who live separately, but still depend on their parents for vital support.
When these parents can no longer care for their children due to their own disability or death, the responsibility will fall on siblings, other family members, and the community. In many cases, expenses will increase dramatically when care and guidance provided by parents must instead be provided by a professional for a fee.
Planning by parents can make all the difference in the life of the child with a disability, as well as that of his or her siblings who may be left with the responsibility for caretaking (on top of their own careers and caring for their own families and, possibly, ailing parents). Any plan should include the following elements: 1) a plan of care; 2) a supplemental needs trust; and 3) life insurance.
A Plan of Care
Where is your disabled child going to live when he or she can no longer live with you? Will he or she move in with a sibling? Or into a group home? Who will make the decision? Who will monitor the care he or she receives? It's never too soon to begin answering these questions and making sure that the living and support arrangements are in place.
It will help everyone involved if the parents create a written statement of their wishes for their child’s care. This statement is sometimes referred to as a "letter of intent." The parents know their child better than anyone else. They can explain what helps, what hurts, what scares their child and what reassures him or her. When the parents are gone, their knowledge will go with them unless they pass it on.
In almost all cases where a parent will leave funds at death to a disabled child, this should be done in the form of a trust. Trusts set up for the care of a disabled child generally are called "special" or "supplemental" needs trusts.
Money should not go outright to the child, both because he or she may not be able to manage it properly and because receiving the funds directly may cause the child to lose public benefits, such as Supplemental Security Income and Medicaid. Often, these programs also serve as the entry point for receiving vital community support services. It is extremely important that the parents of a disabled child create a special or supplemental needs trust as part of their estate plan.
Some parents choose to avoid the complication of a trust by leaving their estates to one or more of their healthy children, relying on them to use the funds for the benefit of their disabled sibling. Except in the case of a very small estate, this is generally not a good idea. It puts the healthy child in the difficult position of having to decide how much money to spend on their disabled sibling. Such funds will be subject to claims by creditors of the healthy child and at risk in the event of divorce or bankruptcy. Finally, the child who receives the funds may die before the disabled child without setting these funds aside in his or her estate plan.
Special or supplemental needs trusts allow a disabled beneficiary to receive gifts, lawsuit settlements, or other funds and yet not lose his or her eligibility for certain government programs. Such trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining his or her eligibility for public benefits. Special needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. Very often, special needs trusts are created by a parent or other family member for a disabled child (even though the child may be an adult by the time the trust is created or funded). Such trusts also may be set up in a Will as a way for a parent or grandparent to leave assets to a disabled child.
A parent with a disabled child should consider buying life insurance to fund the trust set up for the child's support. What may look like a substantial sum to leave in trust today may run out after several years of paying for care that the parent had previously provided. The more resources available, the better the support that can be provided the child. And if both parents are alive, the cost of "second-to-die" insurance – payable only when the second of the two parents passes away – can be surprisingly low.
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