Estate Planning For Children With Special Needs

Bruce Mendelson

Estate planning by parents who have a child with a disability is an important and complicated issue. It is important because we want to assure ourselves that the love, care and concern we have provided during our lifetime will continue to be provided by our estate after our deaths. It is complicated because we are trying to plan events far, far into the future. We need a strategy that leaves nothing to chance and yet has enough flexibility to work should circumstances change.

The issues are so involved that the mere thought of putting them all on paper is mind boggling. Where will our children live? With whom? Should he go to school? Will he work? What kind of work can he perform? Do we want him involved in religious and athletic activities he has always enjoyed? Who would I choose to be my child's advocate? Who could be a successful advocate?

Who might be a likely candidate fifty years from now? Where will the money come from for all of this.

When a child has a disability, whether mild, moderate or severe, her parents have to be concerned for their child's future. As the parents of a disabled child, my wife and I typically talk about plans in the privacy of our bedroom or in the car while on a trip together. The reality is that if none of this talk goes down on paper, it is not going to happen.Tentative plans in the back of our minds is not enough to make it happen.  In fact, it's not even enough to let others know what it is we want to happen. Write down what you have in mind-first choice, second choice, for the things like advocates, living arrangements, vocational training and/or educational goals. Let your guardianship successors know what your intentions and hopes and dreams are for your child's future.

Dying without your wishes written down guarantees that state law, and not your desires will be followed. Almost every couple I meet in my professional practice who have neglected to execute their wills give the same reason...they do not know who they should name as a legal guardian for their children. So, if it is a common problem in families where there is no child with a special need, that same question can cause a paralysis of inaction in couples who have a child with a developmental disability. The responsibility of guardianship may not only be more demanding because of the child's special needs, but it may also be a lifelong commitment for those who agree to undertake that responsibility. Along these same lines, your choice for who you wish to be named as Guardian for your child, the duties and responsibilities, should be thoroughly discussed with the person you wish to choose before that person is named in your Will. The time for Aunt Martha to find out about being your sons Guardian should be well before the reading of your last Will and Testament.

The manner in which we leave our assets to our children can greatly affect the quality of life for our child with special needs. Typically, our children will need to be supplemented by such benefits as Supplemental Security Income (SSI), Medicaid and Medicare. If we leave assets directly to a child in need of government assistance, we have unintentionally disqualified the child from consideration. Sometimes parents choose to disinherit the disabled child, by passing her for her healthy brother. Along with moral obligation, the brother is left all the family assets and the authority and responsibility of making decisions on behalf of his sister. What happens if the brother marries poorly? His spouse wants half the money; half of which might have originally been intended for his incapacitated brother or sister's care and maintenance.

A Special Needs Trust can be a useful tool for parents who want the best of both worlds; a secure future for their child and eligibility for government benefits. The Special Needs Trust acts as protective envelope in which to hold assets for the use of the incapacitated person, and is not subject to governmental or other creditors. In practice I often recommend using life insurance in a Special Needs Trust to provide funds as a source of additional income for an incapacitated individual. The continued care and comfort of an incapacitated child is most uncertain after the death of the life-long natural caregivers and advocates, the parents. What better tool to provide a financial cushion than life insurance on the life or lives of the parents?

The whole purpose of life insurance is to provide protection against the real financial loss that results from death. Life insurance pays substantial tax-free dollars upon the death of the insured. For the incapacitated person, these tax-free dollars can make a huge difference in the quality of his or her future. Some planners prefer a specially designed joint life policy which pays the Special Needs Trust upon the death of the second spouse. The cost is a fraction of what an individual policy might be because it covers two lives.

This type of estate planning sounds complicated when you haven't done it. When it has been done properly, parents can rest assured with the knowledge that their special child will always be cared for, especially when that care is needed the most.

Bruce Mendelson is a Special Agent Associated with the Northwestern Mutual Life Insurance Co. in Garden City, New York. He is a member of the national Association of Life Planners for Persons with  Disabilities, and is available to answer questions at 516-248-2740, fax 516-248-2673.