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Nothing in life can prepare parents for the moment when they realize their child has a special need. The initial emotional impact, which can be devastating for some families, only gives way to the unfathomable pressures of extended care giving, expensive medical treatments, family strife and, generally, life out-of-balance. For many parents, caring for a special needs child is a day-to-day ordeal that drains them of the time or willingness to plan for a future of uncertainty.

Unfortunately, stories abound of families who waited to do the essential planning necessary to ensure that they and their special needs children receive the optimum care and benefits available to them; or who inadvertently followed the wrong guidance only to find themselves facing enormous financial and legal obstacles down the road.

Why Planning Can’t Wait

Such was the case with David and Celeste Mercer, the parents of three children including 16-year old Emma who was diagnosed at birth with cerebral palsy.   They have struggled financially and emotionally to provide Emma with the care and attention she needs to live as normal a life as possible, realizing that she may require care and assistance for the rest of her life. Their tribulations have included marital strife, sibling jealousy, substantial lifestyle reductions, and social avoidance; all of which have taken their toll on the family and kept them out of the logic of planning.

The advice they have followed has been received piece-meal from family, friends, other parents of special needs children, and a legal clinic which provided them with a standard special needs trust.  They both increased their life insurance to ensure there would be enough money available to provide ongoing care for Emma in addition to taking care of her siblings. And, they have done well to keep up with the requirements for securing available state and federal benefits which along with financial assistance from Celeste’s mother, Laurie, has kept them from insolvency.

It wasn’t until Celeste’s mother met with her attorney to revise her will to leave a more substantial portion of her assets for the care of Emma that it was revealed just how close to the cliff David and Celeste were with their planning or lack thereof.  When the attorney probed Laurie on her granddaughter’s situation, she learned that just about everything that could go wrong most likely would under the current arrangements. Among the more severe problems she identified were:

  • Laurie’s will names her grandchildren as contingent beneficiaries, and she was about to increase the amount to be left to Emma. The attorney educated Laurie on the $2,000 limitation on personal assets for Emma to remain eligible for government benefits as an adult. She corrected that by naming the Special Needs Trust as a beneficiary.
  • Although they did name the Special Needs Trust as a beneficiary in their newer life insurance policies, their older life insurance policies name each other as beneficiaries and the children as contingent beneficiaries. That means Emma will be a direct recipient if both parents die which would render her ineligible for government benefits when she becomes an adult. Their qualified retirement plan beneficiary designations have also not been updated.
  • The Mercer’s wills have not been updated to coordinate with the Special Needs Trust. Should Emma receive any assets directly, she may no longer be eligible for benefits.
  • Although their wills do not name a guardian, there are is no guidance for the care of Emma, nor are there any legal mechanisms (i.e., power of attorney, health care directive) for empowering a responsible party to make financial, legal and health decisions on her behalf. Essentially, Emma would be left to make her own decisions.
  • Emma’s Special Needs Trust is a boilerplate trust that doesn’t consider the unique circumstances in her situation. There are no specific instructions as to how the money is to be managed or how it is to be used to provide care specific to Emma’s needs in the future. Nor does it name a trustee to take over after David and Celeste’s death. Most likely, the guardian named in their will would assume the duties of the trustee which may not always be the best choice. There is also a possibility that, if the trust is not drawn correctly, Emma could be denied government benefits.

Planning for Peace-of-Mind

Laurie convinced David and Celeste to meet with an attorney who specialized in planning for special needs children. The attorney consoled the Mercers by pointing out that they had, indeed, taken many of the right steps in securing Emma’s future but, because they were so engrossed in the “here and now,” their plan didn’t have the necessary coordination or long-term outlook required to account for all contingencies. He helped them realize this type of planning is far more complex and fraught with legal and financial obstacles if it is not done with a comprehensive approach in coordination with all other aspects of their financial life.

The Mercers were relieved when they were presented with a simple five-step process to put all of the pieces of their plan together:

  1. Create a new Special Needs Trust tailored to their specific situation: The trust names a trustee they can rely upon to follow instructions on how to manage the money as well as how to coordinate with the guardian and caregivers in utilizing the trust proceeds. It is also coordinated with their wills and with their state’s disability laws and to ensure full compliance with benefit requirements.
  2. Revise their wills: The wills name Emma’s Special Needs Trust as the beneficiary for her portion of any assets, and names a guardian who the Mercers feel is fully capable and willing to assume care responsibilities. The will’s beneficiaries are coordinated with the beneficiary designations of the Mercers’ life insurance policies and their retirement plans.
  3. Create a Power of Attorney and Medical Directive: The Mercers will assume legal control of Emma’s financial, legal and health decisions after she turns 18. The same legal mechanisms are created for the guardian to assume legal control after the Mercers’ deaths.
  4. Create a Letter of Intent: Although it’s not a legal document, it is no less critical. The Letter of Intent contains all of the vital information on the care of Emma, including her daily and weekly routines, her feeding schedule and requirements, her medical needs, therapy or medical care, all the way down to her likes and dislikes. It goes so far as to name the people with whom she can or cannot come in contact as well as the contact information for physicians, therapists, caregivers, and other support people. Once completed, the Letter of Intent should be copied and provided to their attorney, their doctor, guardian, and a trusted family member. Their LOI should be revisited at least once per year.
  5. Communicate the plan with family members: The Mercers have a relatively large extended family of grandparents, uncles, aunts, and siblings, all of whom have contributed some financial help as well as showered Emma with gifts. It would be essential to educate them on the financial restrictions placed on Emma, once she turns 18 so that any monetary contributions are made to the Special Needs Trusts.

By having a more formalized plan and support structure, the Mercers gain more certainty in both Emma’s and their own financial future allowing them to begin focusing on a plan for her life as an adult. There is a strong possibility that Emma will continue her education and even some likelihood of her living on her own, albeit with assistance. The Mercers need to begin investigating all options in these areas to secure additional benefits and get wait-listed for living facilities.

For families with special needs children, the stakes are extraordinarily high, and the future cannot be left to chance. Had the Mercers not met with an attorney when they did, their lives could have become unbearably difficult, and Emma’s future would be muddled with agonizing uncertainty. The few hours it took the Mercers to get their plan in place will be repaid with years of a brighter future for their whole family.

Resources: Financial Planning for Special Needs Children. September 2016 Letter of intent gives valuable advice to future caregivers. April 2019 A Family Handbook on Future Planning. December 2003.

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