One of the major concerns for parents or grandparents of children with disabilities is how to provide for their financial future. Here are some legal tips:
- Buy enough life insurance. A parent is irreplaceable, but someone will have to fill in. In all likelihood, that person or family will have to pay for at least some services the parent or parents had provided when able. If the estate is not large enough for this purpose, it can be made large enough through life insurance proceeds. Premiums for second-to-die insurance (which pays off only when the second of two parents passes away) can be surprisingly low. On the other side of the coin, if a parent or grandparent wishes to reduce her estate, she can establish a special life insurance trust to hold an insurance policy that will benefit a child with special needs. If properly established, this trust will allow the parent or grandparent to make gifts of the insurance premium every year, reducing the size of her overall estate and providing the child with a significant inheritance.
- Set up a trust. Any funds left for a disabled child, whether from an estate or the proceeds of a life insurance policy, should be held in trust for his or her benefit. Leaving money for anyone with a disability jeopardizes public benefits. Many people with disabilities cannot manage funds, especially large amounts. Some families disinherit disabled children, relying on their siblings to care for them. This approach is fraught with potential problems. Siblings can be sued, get divorced, disagree on their responsibilities, or run off with the funds. It can also cause tax problems for siblings. The best approach is a trust fund set aside for the disabled child. While parents are usually fairly cognizant of this problem when they create their estate plans, other family members who may leave funds to a child with special needs should also revisit their estate plans to make sure that a trust is created.
- Will/appointment of guardian. While a will and the appointment of a guardian is important for anyone with minor children, it is doubly so if the child is disabled. Finding the right guardian can be difficult. In some cases, the care needs of the child may be so demanding that he or she will need a different guardian from his or her siblings. The parents need to make these determinations while they can. The will is the vehicle for the appointment of a guardian.
- Care plan. All parents caring for disabled children should write down what any successor caregiver would need to know about the child and what the parent’s wishes are for his or her care. For example, should the child be in a group home, live with a parent, be on his or her own? Usually, the parent knows best, but needs to pass on the information. The memo or letter can be kept in the attorney’s files with the parent’s estate plan.
- Coordination with other family members. Even a carefully developed plan can be sabotaged by a well-meaning relative who leaves money directly to the child with a disability. As discussed above, if a trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest they may like to leave to that child through the trust. Grandparents who are worried about the cost of long-term care should also be made aware that, in certain circumstances, they may be able to contribute to a special needs trust for a grandchild without affecting their own future Medicaid eligibility — a win-win situation.
An adult child may also require a guardian when the parent can no longer serve in this role (whether officially appointed or not). It will probably not be legally possible to officially appoint a successor guardian. So, it may make sense to begin making the transition to a new guardian while the parent is able to assist in the process. This can be done in the form of a co-guardianship, or passing the baton to a successor guardian.