07 May Estate Planning for Adult Children With Mental Illness
Having a mentally ill child can be devastating for a family. Special considerations for the child’s medical, educational, and other needs can sometimes come at the expense of other children who are impacted by having a sibling whose conduct can be disruptive and unpredictable.
When considering an estate plan, parents have to be wary of what to leave their impaired child and the manner in which the assets are left. For instance, if you leave assets to a mentally ill child, chances are that the funds will be quickly squandered. People struggling with mental illness can be vulnerable to scams, to relatives tricking them out of funds, or to spending the funds on drugs or worthless items.
Parents may also need to figure out how to support a child who might not be capable of supporting him- or herself. If diagnosed with a condition such as schizophrenia or bi-polar disorder and unable to work, the child may be eligible to receive public benefits like SSI and Medicaid. If you leave assets to this child in a will or poorly constructed trust, you can jeopardize your child’s continuing receipt of these benefits, even if the inheritance is just a few thousand dollars.
The good news is that you can leave a substantial inheritance to your mentally ill or special needs child by utilizing a discretionary, or special needs, trust while preserving your child’s continuing receipt of public benefits. Under federal law, if your child is under age 65, the child’s own assets can be used to fund the trust. The assets can originate from an inheritance or lawsuit settlement and go directly to the trust that is controlled by an independent trustee.
Establishing a Special Needs Trust
To ensure the trust you set up for your mentally ill child adheres to all applicable rules and laws, retain an estate planning attorney who can construct the trust so that the government cannot seize the funds or render your child ineligible to continue receiving SSI, social security, or Medicaid. For instance, the beneficiary or beneficiary’s representative cannot have direct access to the trust funds or it is considered a resource or income that affects the child’s continuing eligibility for public benefits. The funds also cannot be used to directly purchase food, shelter, or clothing for the child or services and benefits that public programs normally provide.
You should also consider appointing a professional trustee. There are organizations or financial specialists whom your Denver estate planning lawyer can recommend to you. Your trustee will have the necessary experience to know for what purposes the funds may be disbursed and to be careful in not dispensing too much or too little. The trustee also needs to coordinate the payments in conjunction with the reports and opinions of physicians, therapists, and government agencies so that the funds do not replace the government benefits being provided, but augment them.
A healthcare directive is important for appointing someone to act as you child’s agent with the authority to make material decisions about his or her health care or treatment. You can have two directives, one for healthcare and one for financial affairs, and either name the same person to fill both positions or not. For children with special needs or mental illness, a health care directive can include specific instructions on the child’s medications and medical history. If you wish, you can advise the agent or whomever you appoint with power of attorney regarding your child’s specific interests, idiosyncrasies, and preferences so as to continue the child’s accustomed lifestyle and provide for whatever measure of happiness they have.
A child with medical illness needs particular attention and you can provide the means for your child to enjoy life and to receive whatever is necessary for their well-being without minimizing or jeopardizing the government benefits already being provided. If you have a special needs child, consult Dan McKenzie, a Denver estate planning lawyer, who has considerable experience in establishing trusts and estate plans for mentally ill and otherwise special needs children and adults. Mr. McKenzie will work with you to formulate a personal estate plan that includes a will, trusts, advanced health directives, life insurance, POD accounts and other instruments so that your estate will pass to whomever you wish and with a minimum of obstacles and expense. Call him today for an initial consultation regarding all your estate planning needs.