Many families have carefully crafted a living situation for their disabled children. They’ve waded through paperwork to help them qualify for state or federal aid that pays for medical and other services.
Families often cover other needs from their own pockets — recreation, clothing and other small luxuries that improve the disabled person’s quality of life.
Paul T. Shattuck, a professor of social work at Washington University, recently published a study showing that families of children with special needs spend an average of $779 of their own money each year in Missouri and $773 in Illinois for health care expenses alone. However, many families spend much more, he said.
Families want to make sure the expenses are covered when they’re no longer around to provide for them.
"A lot of caregivers’ plans are to live just one day longer than their child," said J. Todd Gentry, a specialist with MetDesk, a MetLife division that works on estate planning for the disabled. However, he added, "None of us knows how long we’re going to be here."
The reality is that many disabled children outlive their parents, so providing for their care after the caregiver’s death is a serious issue. If the parent simply leaves money for the child, it could disqualify the child for aid. Once the assets are gone, all the work to qualify for aid would have to be redone.
A special needs trust is one solution. The parents or other family members can set up a trust with the help of a lawyer, preferably one with expertise in this area, said Rudy Beck, a St. Charles lawyer and president of the Missouri chapter of the National Academy of Elder Law Attorneys. NAELA members focus on legal needs of the elderly and disabled.
Beck said special needs trusts can benefit individuals with a variety of disabilities, such as Down syndrome, cerebral palsy, the aftermath of vehicle accidents, chronic diseases or anyone who may need a combination of government and private services to provide a good quality of life.
Beck said he recently worked with a man who has seven children, including one with Asperger’s disorder, a form of autism. The father told Beck his son may never be able to hold a job nor be able to manage money.
"If he leaves him money outright, he won’t qualify for aid," Beck said.
The father is setting up a special needs trust with two of the young man’s older siblings as trustees. The trustees can only use the money for the disabled person’s benefit during his lifetime.
Assets in a trust can include inherited money, the proceeds of a life insurance policy or gifts made during a donor’s lifetime, said Mike Weeks, an attorney with Beck’s firm. The trust can be effective during the lifetime of the person who sets it up or be created upon their death.
Weeks said the trusts need to clearly state that their intent is to supplement, not supplant government benefits. For example, the trust might allow the child to have nicer living arrangements, a better wheelchair or provide that they could go on vacation with family members.
A trust also could keep the money safe from family members who might be tempted to use the funds for their own benefit rather than the disabled person. If funds are left to another family member, they could be diverted if that family member dies or goes through a divorce, Weeks said.
Bradford Stevens, a lawyer in Clayton, said choosing a trustee requires careful consideration. Ideally, it would be someone who cares about the disabled person, like a family member, but also one who can manage money and comply with terms of the trust.
"You need skills in bookkeeping, accounting and investing," Stevens said. A trustee has to keep records on the trust and file tax returns.
Corporate trustees are an alternative if there’s no appropriate family member. It’s also possible for a trust to be managed by a corporate trustee with a family member as an adviser.
If the trust has funds left when the disabled person dies, the money can go to a beneficiary designated by the trust.
However, if the trust is set up to receive funds from a lawsuit, such as compensation for an injury, state law may require that any money left over be used to reimburse the state for services provided during the disabled person’s lifetime, Beck said.
If the disabled person is mentally competent, he should have a durable power of attorney, a health care power of attorney and an advanced directive, also called a living will. If she isn’t able to make decisions on her own, she will need a guardian to make major decisions.
Stevens said some states have challenged special needs trusts, and he is concerned that legislatures could pass laws to invalidate them. For that reason, he recommends that a trust include a clause allowing a trustee to dissolve it if laws change.