A "Special Needs" Person
in the Family
In last month's commentary the focus was on the economic
problems faced by those who support physically, mentally,
or emotionally disabled persons, and the importance
of assessing and qualifying the resources available
to solve those problems. Here, the emphasis will be
on practical solutions that supplement available government
assistance and enhance existing financial security.
Please feel free to share this information with others.
Trusts: There is no better vehicle for assuring
management, protection, and dispositive assistance for
a disabled or other special needs person than a well-designed
trust. See The New, New Book of Trusts (510)
024-0515 or Rajut, "Planning for Families with
Disabled Members" audiotape (A9834) available from
Million Dollar Round Table at (800) 879-6378, for expanded
information in this area.
Through a judicious choice of trustees, trusts can
provide the needed flexibility - or the rock solid rigidity.
If drafted properly, the trust provisions can continue
to be responsive to the changing needs of the disabled
beneficiary. In addition, a trust can continue for the
lifetime of one or more beneficiaries - and beyond that
point for generations. There are several states that
allow trusts to last perpetually.
Like heads, two trusts are often better than one. The
first trust would be a non-necessaries trust that would
be designed to meet only those financial needs to enhance
the disabled person’s quality of life that cannot,
or will not, be provided through governmental or private
programs. The second trust would be used only if, or
when, or to the extent a financial gap existed between
the total of what the government and private programs
together with the first trust provide, and the needs
of the disabled person.
At least two co-trustees should be considered, one
a family member, relative, or friend and the other a
bank. The combination would offer personal concern and
guidance, as well as professional management, investment,
and security of the financial aspects of the trust.
It is imperative that at least two and preferably three
or four back-ups be selected for each trustee; because
it is highly probable that at least one named trustee
(or successor trustee) over a long period of time will
die, become disabled, move away, or for some other reason
be unable or unwilling to serve or continue to serve.
Life Insurance: If there is sufficient cash
or other assets, many problems can be solved. Absent
sufficient cash or other assets, many problems will
be insolvable. Without question, life insurance is the
single most effective way to assure the significant
financial security necessary for dependants who require
perpetual care. It is also the most certain means of
providing peace of mind to a disabled person's parents
as to how their child's expenses will be paid after
their deaths. The "instant estate" created
by life insurance proceeds may be the only way the family
of a disabled person can afford to provide adequate
security, if governmental care is either not desired,
or the disabled person is, or becomes, ineligible for
such support.
Because it is essential that the coverage be available
whenever it is needed, some form of permanent life insurance
is typically indicated. The cost of term insurance rises
sharply at the very ages where the insurance is most
needed: as the risk of the parent's death (and the consequent
cut-off income to the disabled person from that source)
increases. Since the need to provide continuing financial
support for a disabled child can easily outlive the
child's parents, term insurance is typically inappropriate.
Do not overlook the need for insurance on a parent
who does not work outside of the home, but is the primary
caregiver of the disabled child. The income-tax free
proceeds (even if it's only a modest amount) will alleviate
some of the stress brought on by the loss of the caregiver
parent, and provide the means to hire someone to look
after the child.
Life insurance on the parents (or grandparents) may
be used to "compensate" healthy siblings of
the disabled child. The insurance proceeds may be used
to "replace" the money or resources expended
for the care of the disabled child that otherwise would
have been inherited by his or her healthy siblings.
Certainly, before switching jobs or starting a new
business, parents of a disabled person must give extra
consideration to life and health insurance coverage.
Check the "pre-existing condition" provisions
of the health insurance plan, and look into MERPs (Medical
Expense Reimbursement Plans).
Some Additional Thoughts: Nowhere is the need
for estate and financial planning more urgent or important
than when the problems include providing financial security
for a physically disabled or other special needs person.
Yet parents of such children are often so preoccupied
with day-to-day crises that they sometimes have difficulty
allocating the time, energy, and economic resources
to plan for the future.
The need for continual updating of information, plans,
and tactics is essential. An annual "Financial
Fire-Drill" - a meeting with professional advisors
to review goals, resources, and plans of action and
the staging of a dry run - can make an incredible and
invaluable difference to the overall emotional and financial
well-being of the family.
AS ALWAYS, PLEASE FEEL FREE TO CALL TO DISCUSS THESE
OR OTHER ISSUES OF INTEREST!
List of previous topics >
|
