Estate Planning: Providing For Adult Children With Disabilities

Estate Planning: Providing For Adult Children With Disabilities

Adult children with disabilities present some unique estate planning challenges. If these children simply inherit their parent’s assets, it can disqualify them from Medicaid or disability. Creating a supplemental trust can help avoid this issue. Even $2,000 can jeopardize a disabled person’s eligibility for certain programs.

(Article continues below Infographic)

Infographic, Estate Planning Disabled Children

A supplemental trust allows benefits to go to the child, but the trust is managed by a trustee. The trustee is usually the person who cares for the child after the parent’s death. For parents with multiple heirs, fairness becomes an issue. This can be addressed by leaving an equal portion of the estate to all the heirs, but designating a life insurance policy to the special needs child.

A will attorney can help parents draw up the necessary documents. These documents include a will and power of attorney. A letter of intent is also helpful. It states what the parents would like the supplemental trust to pay for. All assets and insurance policies that are to go to the child should go to the supplemental trust.

Many will attorneys recommend setting up co-trustees. This consists of one friend or family member as well as one person to help manage the money like an attorney or banker. While the friend or family member manages the money the disabled child needs, the co trustee can manage investments.

It is essential for parents to take in the life expectancy of their children as well. The average life span is currently 70 years, so the disabled child may need to be able to draw from the trust for many years. Parents can also have their savings go to the supplemental trust upon their passing. This will help make sure their children are provided for.

It is also recommended to put the majority of the money in a second-to-die policy. This allows the maximum death benefit to be paid to the trust when the second parent or guardian dies, which is when it is needed most.

If the child is unable to care for themselves, the parents must apply for guardianship when the child turns 18. If they are able to make most of their own decisions, the parents can apply for proxy status. This allows them to make decisions for the child if they are unable to make them for themselves.

 

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