Planning For The Future When You Have A Disabled Child

Hi there,

Divorce is even tougher if you have special needs children.  They need more stability and the divorce agreement should reflect their needs.  My very skilled colleague, Elizabeth Crowley, has written a great post on special needs trusts, which are as necessary in a divorced family as in an intact one…

How many of you have in your immediate or extended family, or know someone who has in their family, a disabled child?  In my extended family alone, there are three children who are affected in varying degrees by Autism Spectrum Disorder.  I know firsthand the extraordinary efforts their parents take to obtain services, advocate for their children, and ensure that their children’s current and future needs are taken care of. 

One of the greatest concerns parents and caretakers have is planning for the disabled individual’s future needs after the parents’ deaths.  Will the child be able to live on her own?  Will she be able to hold down a job and earn a living?  Or, in the most severe of cases, might she need around-the-clock care and significant financial support during her entire lifetime?  And, beyond that, how will it be paid for?

Those are the very difficult conversations parents have when their child is disabled.  And, the sooner those conversations are had, the better, as having a solid plan in place is vital to securing the child’s future. 

One of the key challenges in planning for disabled children’s financial futures is to ensure that their government entitlements are not jeopardized.  In order to qualify for the Social Security Administration’s Supplemental Security Income Benefits (“SSI”), a disabled adult cannot hold more than $2,000 in assets, excluding a car and a home.  SSI benefits must be spent on food, clothing and shelter expenses.  When you get SSI, you may also be eligible for food stamps and Medicaid, which pays for medical expenses, mental health services and nursing home care.  For obvious reasons, parents do not want to jeopardize their child’s receipt of these important benefits by leaving property to them under their will that would disqualify them.  While some parents rely on other children to take care of their disabled sibling’s needs when the parents are gone, there are no guarantees, and oftentimes parents want greater assurances than simply “a handshake.”  Even if a sibling had every intention of paying for their disabled sibling, unexpected events such as a bankruptcy or divorce can throw a wrench in the equation.  A Special Needs Trust, or a Supplemental Needs Trust, is oftentimes the solution.

A Special Needs Trust can be used to hold assets for the benefit of a disabled child.  The key with a Special Needs Trust is that while the disabled child will benefit from the assets, he or she does not “own” the assets.  The assets owned by the trust are to supplement the needs of the disabled individual that are not otherwise covered.  It cannot be used to pay for things that SSI or Medicaid covers.  The assets in the Special Needs Trust can, however, be used toward the “extras” that improve the quality of that disabled child’s life, such as specialized programs or camps for a young disabled child, or even a comfortable recliner for a disabled adult with paralysis or mobility problems.  Oftentimes, Special Needs Trusts are funded with life insurance.  Life insurance can be a cost-effective way to fund a Special Needs Trust for a family that may not have a sizable estate.  The bottom line is that there are a variety of funding options depending upon your family’s individual financial circumstances and goals.