Tips on Providing for Children with Disabilities
One of the major concerns for parents with children with disabilities is how to provide for their financial future. Here are some tips:
Buy enough life insurance. A parent is irreplaceable, but someone will have to fill in. In all likelihood, that person or 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 disabled child, 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 disability jeopardizes public benefits. Many people with disabilities cannot manage funds especially large amounts. Some families disinherit disabled children, 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 siblings.
Will/appointment of guardian. While a will and the appointment of a guardian is important for anyone with minor children, it is doubly so if the child is disabled. 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 will is the vehicle for the appointment of the guardian.
Care plan. All parents caring for disabled children should write down what any successor caregiver would need to know about the child and what the parents wishes are for his or her care. For example, should the child be in a group home, live with a parent, be on his or her own? Usually, the parent knows best, but needs to pass on the information.
Coordination 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 disability. 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 life to leave to that child through the trust.