Disability creates need for options


November 21, 1999|By Eileen Ambrose

SUSAN AND DAN Dotson weren't thinking wills and trusts eight years ago when their son, Matt, was born with cerebral palsy.

Initially, the Columbia couple was swept up in doctors' visits and physical therapy for Matt, who can't walk and communicates through gestures and body language. They lobbied to get him into preschool and then into a neighborhood grade school, where the Dotsons thought Matt had the best chance to make friends.

But two years ago, with Matt a popular kid in school, the Dotsons began financially planning for the time when they would no longer be alive to care for their firstborn. They executed wills and set up a trust to pay some of Matt's future expenses.

"He'll change and grow and be different, and we may have to change things as we go," says Susan Dotson, 38, director of strategic planning and support for a labor union in Washington. "At this point in time, I feel a lot of relief that we have something in place."

Many parents do a financial juggling act, planning their own retirement while saving for children's college education or supporting elderly parents. For families of children with disabilities, the feat gets more complex.

Children with disabilities are living longer and increasingly outliving their parents. That means parents might have to set aside enough money to maintain their child's lifestyle and find someone to care and advocate for the child for years after they're gone. They must be careful that planning today doesn't make the child ineligible for government benefits later.

"You're fearful of doing the wrong thing, which can lead you to do nothing," says Gregory Franks, manager of Merrill Lynch's Baltimore office, which recently introduced a program to help families with such planning.

There is no one-size-fits-all financial plan for children with disabilities. But there are some basic tools their families use:

A will. It's in this legal document that parents spell out where they want their assets to go when they die and who they want to settle their estate. The will is also the place to name the guardian of minor children until they become adults. If parents don't indicate their wishes on guardianship, then the court will end up making this important decision for them.

Some parents are the legal guardians of adult children who cannot make decisions for themselves. These parents can designate in their wills who they want to succeed them, says Diann Churchill, a Towson lawyer and an author of the Maryland Developmental Disabilities' Council guidebook, "Planing Now: A Futures and Estate Planning Guide for Parents of Children and Adults with Developmental Disabilities."

Just because children have disabilities, however, doesn't mean they won't be able to make decisions on their own as adults, she added. In some cases, though, adults might need a guardian to make strictly financial or personal decisions for them, she said.

Special needs trust, or discretionary trust. To be eligible for most government benefits, including Medicaid and Supplemental Security Income, a child cannot have more than $2,000 in his or her name. That's where a special needs trust helps.

Parents can put money, the house and investments into the trust, naming the trust as owner of the assets. They also must select a trustee to administer the trust on behalf of the child.

The trust's resources are used to supplement -- not replace -- government benefits that pay for the child's basic support. For instance, SSI pays up to $500 a month for food, shelter and clothing. The trust can pay for vacations, educational training or medical care not covered by the government.

"The language of this trust is very critical," says Minoti Rajput, a financial planner with Secur Planning Associates in Southfield, Mich., who specializes in planning for children with disabilities.

If the trust says the assets are to be used for the child's basic support, the child won't get government benefits to pay for basics until the trust's assets are used up, she says.

Life insurance. Many parents don't have a lot of money to pour into a trust, so they fund the trust by naming it as beneficiary of their life insurance.

Parents often take out a "Second To Die" policy, which provides a payout only after both parents die, says Nita Savader, a Merrill Lynch financial consultant.

Letter of intent. This is a letter that includes the parents' wishes for the child, a list of the child's medication and names and numbers of doctors. "It will accompany the will, but it doesn't take the place of the will or trust," says Patricia Wolfe, a Merrill Lynch financial consultant and parent of a son with Down syndrome.

Jay and Janis Silverman of Owings Mills used the letter to let a trustee know that their 17-year-old daughter Melissa, who has Down syndrome, loves the theater, travel, the Orioles and country music. That way, the trustee will understand that Melissa needs money for trips or tickets to Shania Twain, says Jay Silverman, a high school math teacher.

Wolfe recommends that the letter be updated annually on the child's birthday.

For more information, contact the Maryland Developmental Disabilities Council at 410-333-3688 or 800-305-6441 for a free copy of "Planning Now."

Financial planning for children with disabilities isn't simple, and often isn't easy emotionally.

Susan Dotson, who also has a 5-year-old son, says she tells other parents of the peace of mind that comes with financial planning. "At least you know, God forbid, that if something does happen, your children are taken care of," she says.

Do you have a personal finance issue of general interest that you would like to see addressed in this column? Contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose@baltsun.com.

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