The following US News & World Report Article was brought to my attention by fellow attorney Steve Worrell, who posted it on his Georgia Wills Law Blog. Regardless of what state you live in, it is important to work with an attorney who can help you put a plan in place for your family which will protect all your children, including those with special needs.
Sarah Palin's son Trig helps spark a national conversation
Sarah Palin's 5-month-old son, Trig, who has Down
syndrome, has sparked a national conversation about kids with special
needs: the extra care they require, available government benefits and the pros and cons of prenatal testing.
One topic that has gotten less attention is the financial stress
that parents often face. Many kids with special needs require financial
support throughout their lives, and while government assistance often
covers basic medical care, holding assets over $2,000 can make them
ineligible. That means advance financial planning, through wills,
estate planning, and trusts, can be essential to ensuring kids with
special needs have the support they require once they grow up.
"If [parents] fail to deal with these issues now, it will jeopardize
their child's quality of life down the road," says Tanya Harvey, an
attorney who focuses on special-needs planning in the Washington, D.C.,
law office of Bryan Cave.
Here are tips from leading experts in the field of financial planning for kids with special needs on how to get started:
1) Establish legal guardianship.
After a child reaches the age of 18, he is considered an adult. But
some kids may still need a guardian, says Harvey. One of her tests
includes asking whether a child would impulsively buy a pretty diamond
in a store window. If the child shouldn't be held responsible for such
a purchase, then he needs to have a legal guardian, or else the
contract would be binding.
Karen Greenberg, director of Prosperity Life Planning, a nonprofit
that teaches financial planning to families of children with special
needs, along with her husband and associate director, Jaret Vogel, are
urging Congress to adopt a special-needs tax credit that
would help parents pay for the cost of establishing such a
guardianship. Their proposal would provide up to $5,000 in tax credits
to offset the cost of legal fees.
Families often can't afford to set up a guardianship, which involves
court expenses and doctors' fees, so they don't do it, say Greenberg
and Vogel.
2) Describe your child in writing. Greenberg recommends writing down a "minibiography" of
children that could be given to any future guardians or caretakers. It
should include medical information like allergies but also personal
preferences, goals, and details about friends.
3) Protect your child's eligibility for public benefits.
Medical care can be so expensive that even relatively wealthy families
may need to rely on Medicaid and Social Security income. Because having
more than $2,000 in assets threatens that eligibility, "you want to
make sure that if your child is going to receive any money, that it's
in a special-needs trust so it doesn't disqualify them," says Harvey. A
lawyer or financial professional can help establish a special-needs
trust, which doesn't count against the $2,000 limit. Money left to the
child through a will should be directed into this trust.
Parents often choose to set up a trust that goes into effect when
they die, says Harvey, to allow them flexibility to spend that money in
different ways in the meantime. But families may be better off setting
up the trust immediately if a grandparent wants to leave money to the
child, for example.
Greenberg adds that another benefit to establishing a trust is that
the money is then considered separate from the parents' assets, which
protects it from creditors and divorce settlements.
4) Consider insurance policies.
Life insurance that pays out upon the death of the second parent—often
called "last to die" policies—can help parents ensure their child has
enough money after they both die without straining their budgets too
much beforehand.
When Greenberg, who has an autistic son, examined her budget several
years ago, she decided to purchase such a policy. It pays out $650,000
on the death of Greenberg or her former husband, whichever comes
second, for about $2,000 a year. In addition, for years, she tucked
away about $400 a month into a special-needs trust, which now holds
around $55,000. That means that if both she and her former husband were
to die, their son would have the $650,000 life insurance payout and the
$55,000 trust. Together, she calculates, that will generate an income
of around $35,000 a year—enough to pay the bulk of his expenses.
5) Avoid common family-related mistakes.
"A lot of parents say, 'How about if I give money to a relative?'" says
Harvey. But doing so is a mistake, she says, because not only is the
relative not legally bound to spend that money on your child but a
creditor or divorce settlement could take it.
Greenberg recalls looking into her options for her son in the 1980s,
when the common wisdom held that parents should leave money to their
other children, who would then be expected to care for their sibling
with special needs. But Greenberg doesn't like the idea of burdening
siblings, who have often already experienced so much stress.
Family members and friends planning to leave money to a child with
special needs should also be encouraged to do so through a
special-needs trust instead of leaving money directly to the child,
which could interfere with benefits eligibility. Grandparents may even
want to have their wills looked over by an attorney to make sure any
gifts don't threaten that eligibility.
Source: US News & World Report.
Sorry, comments are closed for this post.