One of the major concerns for parents with minor children with disabilities is how to provide for their future in the event that the parents pass away. The following is a list of items that parents with disabled children should consider.
Establish A Special Needs 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. Public benefits are available to provide for the normal essentials of the child. Many parents want to leave money to their children to provide for them additional comforts over and above what governmental assistance will provide to them. Many public assistance programs are what is know as "resource based". This is a fancy term for saying that if the child has money available, the governmental program will want that money spent before making public finds available. Many parents want to leave money to their disabled children to allow the child to have something more than the government provides Thus, money left to a minor disabled child may wind up being used for their primary care and exhausted. By placing money into a special needs trust, the parent can make sure that the money is available for the "special needs" of the child while maintaining the child on the various governmental assistance programs.
Additionally, many people with disabilities cannot manage funds - especially large amounts. Creating a special needs trust will insure that someone other than the disabled child will use the money in the best interest of the child. Rather than leave money to a disabled child, 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. A special needs trust will make sure that the money is used for the disabled child.
A special needs trust can be established in the parents' will, or it can be set up while the parents are alive so that the parents or others can leave money to the disabled child while the parents are alive and know that that the money is protected.
Prepare a Will. While a will and the appointment of a guardian are important for anyone with minor children, it is even more important if the child is disabled. Of utmost importance is to establish a guardian to have physical custody of the minor child. Finding the right guardian for a disabled minor child can be difficult. In some cases, the care needs of the disabled child may be so demanding that he or she will need a different guardian from his or her siblings. The will is the vehicle for the appointment of a guardian.
Prepare A Care Plan. All parents caring for disabled children should communicate 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 or be on his or her own? Usually, the parent knows best, but needs to pass on the information. Too often, parents fail to communicate their desire to other family members, leaving them to guess about what the parents would want done. The best way for the parent to do this is to discuss their plans with family members and write down what their thoughts are, to insure that it is accurately recalled later.
Discuss 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. For example. A grandparent, aunt or uncle may leave money in their will, either intentionally or untentionally, to a disabled child. As noted above, leaving money to a disabled child may result in the loss of governmental programs and the money that is left to the child being used in its place. If a special needs 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.
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. A second-to-die insurance policy (which pays off only when the second of two parents passes away) should be considered. Of course, the policy should be made to pay into the special needs trust to insure that the policy proceeds will be used for the child's needs and to maintain any governmental assistance.