Many families want to set aside something to ease their children's way in the world when they pass away. However, parents of an adult child with disabilities need to be especially vigilant with their estate planning to guarantee their child's secure financial future. Adults with severe disabilities are living longer than ever, so it's critical to create a financial plan that will protect your retirement and your child's needs after you're gone.
Kiplinger's recent article, "Create a Plan for an Adult Child with Disabilities," advises parents to write a "letter of intent." This is a road map for future caregivers and trustees on how best to care for your child. The letter should detail every facet of your child's life, such as favorite foods and activities, relatives and friends he or she should continue to see, and medical and therapy regimens. Make sure that you select an attorney who specializes in special needs planning to draw up your estate plan. This expert will help you with all of the rules for public benefits that provide income, health care, and community services to persons with disabilities.
For example, an adult child receiving Supplemental Security Income is eligible for Medicaid-based services, such as vocational training, unless her income and assets exceed certain limits. When her parent dies or retires, the child may be switched to a higher benefit based on the parent's Social Security earnings record. Be aware that government caseworkers may mistakenly suspend the beneficiary's Medicaid eligibility. That's why you should have an experienced special needs attorney make sure the caseworkers understand that they can't count this additional income from Social Security.
Parents with some wealth also need to preserve their child's eligibility for these benefits. It's important that your child not own assets outright that could exceed the legal limits—especially after you die. Your attorney may advise you to create a Special Needs Trust, which will protect benefit eligibility. When you die, you leave your assets to the trust instead of giving them directly to your child. Ask relatives who want to help your child to do the same thing.
A child's benefits pay for basic needs and a special needs trust could pay for extra things such as music therapy or a portable wheelchair and other quality-of-life expenses—like a TV or a special outing to a baseball game or a play.
You also want to select a trustee with care, as he or she will invest the funds and pay the bills, and find experts to keep tabs on caregivers and public benefits. Many special needs lawyers will take on this role and disability-related advocacy groups often serve as trustees.
Some parents do not set up a trust and leave the entire estate to their other children with the expectation that they will care for their sibling with special needs. However, the other children could run into financial trouble of their own or may have a change of heart about helping. There's also the scenario in which the other sibling providing for her sister could die, and the money will go into her estate for her husband and her children.
In addition to legal help, contact associations that advocate for your child's disability, like United Cerebral Palsy and Autism Speaks. Local chapters offer family support groups, where you can learn about community resources.
Reference: Kiplinger's (December 2015) "Create a Plan for an Adult Child with Disabilities"