If your child has a chronic mental or physical disability such that they will be unable to provide for themselves as an adult, you constantly worry what will happen to your child when you die, or should you become disabled yourself. Sometimes the child has been disabled from when they were a child but sometimes a child may become unexpectedly disabled as an adult through an accident or a medical condition. Either way, there are practical steps you can take to provide for your adult child’s future.
Special Needs Trusts and Supplemental Benefits Trusts
In our recent blog post, Trusts that May Enable You to Protect Your Assets and Your Income when Applying for Medicaid in Texas we addressed protecting Medicaid assets with a special needs or supplemental benefits trust.
These trusts can provide and protect funds for those with disabilities. Funds in these trust do not count toward allowed assets for Medicaid eligibility, but they also are not counted for eligibility for other government benefits such as Section 8 housing and Supplemental Security Income (SSI). A trustee can also provide financial management should the beneficiary be unable to manage their own funds. As discussed in our previous article, special needs trusts are self-funded and supplemental benefits trusts are funded by a third party such as you, the parent. However, both types of trusts are often just referred to as special needs trusts.
That’s all well and good, but a trust is only as useful as the funds you can contribute to it. Many people have a great deal of difficulty even providing for their own retirement, much less the needs of an adult child who may live decades beyond them. But even if you are not wealthy, there is an answer.
Last-to-Die Insurance Policies
A last to die insurance policy is an effective way to fund a trust. These policies are also known as second to die or survivorship life insurance policies. They enable you to pay affordable premiums that pay substantial death benefits when you die. If you have set up a supplemental benefits trust, the policy can pay into it directly upon your death without going through probate court.
Texas ABLE Accounts
The Texas ABLE (Texas Achieving a Better Life Experience) program helps people with disabilities and their families to save funds for expenses related to their health and quality of life. It is established and maintained by the Texas Prepaid Higher Education Tuition Board with assistance from the Texas Comptroller of Public Accounts.
If your child has a disability that that began before age 26, you can put money into the account that exceeds the $2,000 allowed to receive SSI and Medicaid benefits. If the child is working, they can add funds and parents can contribute up to $14,000 annually.
If a disabled person is eligible and at least 18 years of age, they can open and manage their own account. If they are under 18 or cannot or do not want to exercise signature authority, their authorized legal representative may do so. An authorized legal representative must be a parent, legal guardian or other fiduciary such as a trustee or someone with power of attorney.
Planning for the Future
Following are some things to keep in mind while you are planning the future of your disabled child:
- Be realistic. Consider what you will be able to afford to put directly into the trust and to pay in premium payments not just now but upon retirement.
- Consider the child’s lifestyle. In determining what insurance policy to buy, consider where your child will live, what care they will need and all other expenses. If the trust includes a house, do not forget that houses require maintenance.
- Consider the child’s siblings. If most of your assets are going toward your disabled child, this may cause disharmony among your other children. Have a heart to heart conversation with them and consider making them contingency beneficiaries of a supplemental benefits trust.
- Consider professional trustees or guardians. If you are overseeing your adult child’s finances or personal decisions, you need to plan on who will do that when you are gone.
- Consult with professionals. Once you are gone, you will not have a second chance to provide for your disabled adult child, so don’t wing it. Consult with a good financial planner, insurance specialist and Texas estate planning attorney.
Call Shann M. Chaudhry for an Affordable Consultation
Your disabled child’s future depends on planning now. Call the San Antonio law offices of Shann M. Chaudhry Esq., attorney at law, for an affordable consultation. Our experienced Texas estate planning attorneys can help guide you and set up trusts. Contact us at (210) 646-9400 to schedule an appointment.