A few decades ago, children with severe physical and mental disabilities were not expected to outlive their parents. However, medical advances and specialized care allow these children to live into advanced adulthood. This good news raises concerns for their parents.
Who will care for my adult child when I am gone?
If you have an adult child with special needs, you likely had yourself appointed as his or her guardian at age 18 in order to oversee financial and medical issues. Your planning does not end there, however. The next step is to plan for a day when you and your spouse are no longer able – or available – to care for your child.
Traditional estate planning can be insufficient to meet your needs. You cannot simply name your child as the beneficiary of your retirement plan or account. If your son or daughter is incapable to handling money, has an addiction problem or receives governmental benefits due to a disability or special need, an inheritance in a lump sum could be disastrous, even if it looks good from a tax standpoint.
Establishing a trust may be your best option. Colorado families frequently use trusts to help avoid probate and estate taxes. Trusts serve other purposes as well.
Trusts that are as unique as your child’s needs
Just as there are many types of family situations and individual needs, there are many types of trusts. The type you need will depend on your unique circumstances. An experienced lawyer can help you choose which option will best suit your long-term goals and tailor your trust to suit the unique needs of your family and your adult child.
Some options include:
- Special needs trusts: These trusts are common for those who wish to keep the management of inherited funds out of the hands of the person who will receive the benefit from those funds. The trust addresses the specific needs of the individual, allowing a trustee to dole out funds on a discretionary basis.
- Special-purpose trusts: Not as well-known as other types of trusts, special-purpose trusts can provide children with a particular level of lifestyle they may have enjoyed but for their addiction issues or mental illnesses.
- Impenetrable trusts: A Bulletproof Trust TM is an option available from The Hughes Law Firm, P.C., for situations where a beneficiary is irresponsible or subject to creditor claims or unscrupulous people, such as fake “friends” or untrustworthy marital partners.
Do not compromise your child’s right to future benefits
It is important to set up your trust in such a way that your child’s eligibility for governmental benefits is not compromised. Social Security, Medicaid, subsidized housing and other government benefits may be the only means of income for adults with disabilities or special needs. If your child inherits money or assets, that inheritance may drastically reduce the amount of benefits to which he or she is entitled.
Let a skilled estate planning attorney help guide you through the estate planning process, providing you with peace of mind about your future and the future of your children.