November 25, 2006
Meeting Special Needs and the Need for Peace of Mind
By HILLARY CHURA
On top of the therapists, doctors, medicines and other issues of daily living, the last thing that parents of disabled children may want to face — establishing a special-needs trust — could provide the most comfort.
“You worry so much,” said Mrs. Cotiaux
Most services for the disabled are provided through state-administered Medicaid programs, with federal Supplemental Security Income providing a monthly stipend for adults. To be eligible for Supplemental Security Income, however, potential recipients cannot have more than $2,000 in assets. Because that amount is inadequate for a lifetime of haircuts, hobby supplies, vacations and DVDs — expenses not covered by the government — a supplemental-needs trust can enhance quality of life. Without a trust, a lifetime of care for a disabled person could eat through even a sizable inheritance.
“I don’t care if the parents have $10 million, chances are the child needs Medicaid,” said Craig Marcott, a certified financial planner in East Patchogue, N.Y. “Most services are Medicaid-based, and you can’t pay to get into them.”
About 51.2 million Americans have some disability, according to the Census Bureau.
While the term trust tends to imply great wealth, many special-needs trusts contain less than $100,000. Because the trust does not belong to the disabled person but is used to supplement a lifestyle, it does not compromise government benefits. These so-called third-party special-needs trusts cannot be financed with the money of the disabled individual. To do so would require a different type of trust.
About 60 percent of children with special needs will require lifelong care, said Nadine Vogel, president of Springboard Consulting, which advises companies how to market products and services to the disabled and their families. It is uncertain how many people who could use trusts actually have them, but an online survey of 1,718 respondents, conducted by the Metropolitan Life Insurance Company and released in January 2005, found that 88 percent of the parents of special-needs children do not have a trust to preserve eligibility for government benefits.
Still, many parents are reluctant to start a trust because they fear making the wrong decision, do not want to face the idea that one day they will be unable to care for their child, or do not know how to establish one or whom to ask. In addition, they may not like the notion of putting their child on what is perceived to be welfare.
Some may believe they can avoid drawing up a trust by leaving the money to a trusted relative or friend. Specialists universally discourage that. Even people who intend to follow up on a moral obligation to care for the disabled child could lose the money in a divorce, bankruptcy, lawsuit, premature death or other unforeseen calamity, the specialists say.
Karin and Randy Tuurie of
“It’s an added expense,” she said. “It’s the last thing you want to spend your money on, but I feel a much greater sense of peace having done it — knowing there are plans for him that I have approved of, where we would know Noah is living the life we wanted him to live.”
The trusts are usually thought to benefit adult
children because parents of younger offspring ostensibly would be around to
care for them. But even young families should consider creating a
supplemental-needs trust in case of a catastrophic event, said Joseph A. Straka, executive director of PACT, which administers
trusts and coordinates services for people with disabilities in
Establishing a supplemental-needs trust can cost $1,500 and up, depending on the level of complexity and the state in which it is written.
“The trust is like a bucket, and if you don’t put anything
in the bucket, it’s almost worse than not having the bucket,” said Mark Merenda, a
Kirsten Izatt, an estate
planning lawyer in
“It takes someone who knows the beneficiary well as a human being, and it takes a special knowledge about public benefit laws and trust laws,” Ms. Izatt said. “In the absence of professional advice, it’s more likely that family members will make a mistake that might result in the beneficiary’s losing eligibility.”
In addition to advising the Cotiaux family on the trust, Mr. Marcott suggested that they have a letter of intent that they periodically update with Scott’s habits, medication and even details including where he likes to vacation and whether he prefers baths over showers.
He also urged them to find a permanent home for Scott when he is in his mid-20’s or early 30’s rather than when they die so that he would not have the double trauma of losing his parents and moving.
Mrs. Cotiaux said that the family was looking at several generations of guardians and that past anxiety was gone.
“Everything is taken care of right through Scott’s funeral arrangements. I don’t have to worry about where the money would come from or how it will be funded,” she said. “I know everything’s going to be fine.”