Five Planning Pointers for Parents with Disabled Children

Buy enough life insurance.  A parent is irreplaceable, but someone will have to fill in if the worst happens. It may be siblings or other relatives. In all likelihood, the 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. Premiums for second-to-die insurance (which pays off only when the second of two parents passes away) can be surprisingly low.

Set up a trust.  Any funds left for a child with special needs, 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 special need may jeopardize public benefits. Many people with special needs cannot manage funds — especially large amounts. Some families disinherit children with special needs, 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 the siblings. The best approach is a trust fund set aside for the child with special needs.

Create a Will and appoint a guardian. While a Will and the appointment of a guardian is important for anyone with minor children, it is doubly so if the child has special needs. Finding the right guardian can be difficult. In some cases, the care needs of the child may be so demanding that he or she will need a different guardian from his or her siblings. The parents need to make these determinations while they can. The Will is the vehicle for the appointment of a guardian.

An adult child may also require a guardian when the parent can no longer serve in this role (whether officially appointed or not). It will probably not be legally possible to officially appoint a successor guardian once the parent is out of the picture. So, it may make sense to begin making the transition to a new guardian while the parent is able to assist in the process. This can be in the form of a co-guardianship, or passing the baton to a successor guardian.

Write down the care plan.  All parents caring for children with special needs are advised to write down what any successor caregiver would need to know about the child and what the parent’s wishes are for his or her care. Should the child be in a group home, live with a sibling, be on his or her own? Usually, the parent knows best, but needs to pass on the information. The memo or letter can be kept in the attorney’s files with the parent’s estate plan.

Coordinate 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 special need. If a 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.