If your child was recently diagnosed with a disability, you probably have a lot of questions about their future. Parents of a disabled child in the U.S. worry about the child’s access to medical care (whether private or government funded); social services; and educational services. They want to protect the child from being ignored and disregarded by the education and medical systems, and hope the child will have stability and dignity as an adult.
Regardless of the disability diagnosis, every parent wants to know, how do I make sure my child is taken care of, even if I’m not around? The answer to this is more complex if a child is disabled, and also varies depending on the severity of the disability. To get the answer, the parent should consider:
will the disabled child be self-supporting as an adult (i.e., have access to job-based health benefits and job income), and be able to acquire assets, have supportive human relationships, and/or live outside of an institution?
will the disabled child meet federal and state poverty program guidelines for disability, and qualify for medical coverage, monthly income, and case management services provided by government and their service partners?
what is the age of the child at the time of planning?
what is the nature of the disability and the prognosis over the projected life expectancy of the child?
Understanding Distributions
Estate planning for minor children is more complex if a child is disabled. If the disability is significant, the parents may want to permit expansive treatment distributions in their minor’s trust. It is important for parents to understand what benefits will flow from the trust because some trustees resist making distributions from a trust, and/or fail to adequately investigate the beneficiary’s situation to determine how distributions may help. Parents can include specific recommendations in a letter of intent for the trustee. Then a copy of the recommendations can be provided to a trust protector, relatives, or the disabled child, so that after the parent’s death there is someone who can push the trustee to help the disabled child as intended. Distributions from a support or discretionary trust help the employed disabled adult’s living standard. A letter of intention could also suggest enhanced standard of living distributions. The trustee can make distributions for transportation, telephone, and internet services, or provide support during intermittent periods of unemployment. The child’s disabilities could limit his or her lifetime earnings, and a trustee could make company retirement plan contributions, or fund Roth and traditional IRAs, or supplement the child’s retirement savings by purchasing a deferred annuity providing monthly payments when the child reaches a certain age. The disabled adult child may periodically need vocational counseling and assistance to find suitable work. the trust can hire private vocational advocates and job coaches, rather than having the disabled adult rely on haphazardly funded public vocational services. The trust could pay for counseling, COBRA and HIPAA health plan premiums, or moving expenses, and eventually provide income to supplement the disabled working adult’s Social Security Retirement checks.
Public Benefit Qualifications
If the disability will substantially impair the child’s earning abilities, then the planner must consider the possibility of future public benefit qualification. Where a disabled minor child is not expected to be self-supporting, the parent needs to know about Social Security survivor benefits, and financial screening eligibility criteria for many publicly paid benefit programs. Supplemental Security Income, Medicare, and Medicaid all have a “means” test for eligibility, and therefore become the central focus for much special needs trust planning and administration. Available resources valued over $2,000 disqualify the minor disabled child from some public programs. To find out more about these services and how they impact disabled individuals, the Special Needs Alliance has published a free handbook with more information downloadable at: https://www.specialneedsalliance.org/free-trustee-handbook/
The school district programs for the minor child do not have financial screening eligibility criteria, but financial screening will be required for access to many adult residential or social service programs. Public funds for job and residential care slots flow through different government agencies serving different disability populations. For example, different agencies manage developmental disabilities monies, mental health disabilities monies, and physical disabilities monies. All residential placement for disabled adults is limited. Job or residential planets suitable for a sweet, calm, developmentally disabled young adult will be unsuitable for the young adult with an explosive combination of mental illness, autism, developmental, and cognitive disabilities. The estate residential care providers will simply refuse to take the young person with difficult behaviors, or drug and alcohol problems as well as disabilities. parents cannot rely on the overburdened haphazardly funded public case managers to find a home for the chaotic disabled child. Many communities have trained advocates who can be privately hired to assist the parents in finding job placements or residential placements for the disabled adult child. The parents of a disabled minor child need to know that the special needs trust should pay for a private advocate’s services in the transition from public education-paid to adult disability services. If a paid professional advocate is available, a reluctant family member may be persuaded to take on the responsibility of being a trustee, a trust protector, or guardian nominee for a disabled child. In the chaotic disabled child planning situation, the special needs trust is a critical payment source for a hired advocate who accesses social, medical, and other care needed by the disabled child.
If the parents expect the disabled child to be self-supporting, a special trust may not be necessary since some disabled children can manage their own work life and earn enough to support their families. In these cases, parents will still want to consider whether the child is susceptible to undue influence from financial predators. Some disabled children, like some non disabled children, would also benefit from a trust for creditor protection. This practitioner does not do generic contingent trust planning, but rather, I help parents or other relatives plan concretely for that particular child’s condition, particularly situations in which the child suffers some condition that will likely reduce the child’s vocational choices.
Life Insurance
Most families with disabled children have one stay at home parent and another who works outside the home. If the working parent dies, the surviving parent has an immediate need for income to pay necessary expenses for housing, medical care, food, etc. If the stay at home spouse dies, the working spouse needs to buy custodial services for the disabled child. If the working surviving parent has to leave the job to provide care, or reduce his or her work hours, the family may spiral into poverty, and lose health coverage.
Substantial life insurance for each parent is the best way to insure against the risk of loss of the services of the stay at home parent and the loss of income from the working parent. Since the child is often a minor or is receiving Medicaid or other means-tested government benefits, the child should not own the policy. The cash value of the policy is a countable asset of the owner for purposes of Medicaid and SSI, programs which have very low asset limits. Loss of these critical benefits could be catastrophic for the child. You may be the owner, as long as you do not have long-term care or estate tax issues, which could cause complications for you. An alternative could be to have another child own the policy, or, for a larger policy, to have an appropriate type of trust as the owner and the beneficiary. The Trust distributions could, if written liberally, benefit both caretaker surviving spouse and that child—keeping the caretaker mentally and physically healthy will be crucial to the minor disabled child’s welfare. It is particularly important for parents of disabled children to get a substantial life insurance policy if they expect their nominated guardian to share their home if both parents are gone. Around-the-clock supportive care costs $6,000 to $10,000 per month. Health care costs are astronomical for some medical conditions. Many health plans have a lifetime limit on benefits (usually $1 million to $2 million). The most expensive health benefit is mental health coverage. No private heath plan will provide sufficient in-patient or out-patient treatment for the chronically mentally ill child. If parents believe they can fully support the projected care costs for a disabled child, they can still use estate planning help to (1) help the family find an expert to develop a life plan and cost estimate for their child, to determine whether the family can afford to fund a discretionary or mandatory support trust, and (2) draft a discretionary or mandatory support trust for the child as part of testate plan.
Financial Power of Attorney Provisions
During a parent’s incapacity or decline, the parent’s own power of attorney can include specific provisions designed to help the child, as the parent would have were the parent not suffering a medical or cognitive decline. These provisions vary by the parent’s wealth and resources, but usually include gift and transfer provisions, support and/or special needs provisions, and provisions for the creation of a trust for the benefit of a disabled child.
Because a disabled child often has greatly disrupted life patterns as a parent becomes ill or declines mentally, I suggest the parent’s financial power of attorney specifically authorize the agent to help the child. If the parent wants his or her funds used to fully support that child, even if the support takes the child off public benefits, the power of attorney should so instruct the agent.
Conservatorship
If your child has a cognitive disability and is near or over the age of 18, you might be wondering whether you should seek a conservatorship over your child. The short answer to this question is, “it depends.” Once your child turns 18, you as their parent lose the legal authority to make decisions (medical, financial, educational, etc.) for your child. The parent must then decide whether to seek decision-making authority for the child, and if so, how much authority. The person given the authority to make decisions is called a conservator and in California, a conservatorship can only be established by an order of the probate court. A conservator is appointed for another adult, called a Conservatorship of the Person, when the probate court concludes that the adult is unable to care for his personal needs, such as maintaining regular hygiene and taking prescribed medication. The conservator is charged with protecting the adult by ensuring that his daily needs health care are adequately met. A Conservatorship of the Estate is established when an adult cannot handle financial matters so a conservator is necessary to manage his income and pay bills. In most cases, the court will appoint the same conservator to be responsible for the adult's person and estate if both roles are required.
Full and Limited Conservatorships
In California, the probate court is authorized to appoint a conservator with full powers over the adult or to limit those powers in specific ways. The appointment of a conservator with full powers is typical in the case of an elderly person suffering from dementia who cannot provide for his own daily care or manage his finances. A limited conservatorship is normally established for an adult with some form of developmental disability, but who is capable of performing many tasks unsupervised. In this case, the probate court's order will specifically specify the conservator's limited powers, such as deciding where the conservatee will live, his vocation or educational training and signing contracts.
LPS Conservatorship
California law also provides for a special type of conservatorship known as an LPS Conservatorship. The name LPS is an abbreviation for legislation -- the Lanterman, Petris and Short Act -- that authorizes conservatorships specifically for adults who are diagnosed with a serious mental illness according to the Diagnostic and Statistical Manual of Mental Disorders, such as schizophrenia, obsessive compulsive disorder and bi-polar disorder. The probate court will establish an LPS Conservatorship only if it finds beyond a reasonable doubt that the proposed conservatee suffers a serious mental illness based on an evaluation by a psychiatrist authorized to do LPS evaluations.
Contact me for more information about the steps to obtain a conservatorship in California and for help preparing all of the required paperwork.