Planning for Disabled Children

There are many parents that have children with disabilities. It is important for those parents to plan for the care of their children when the parents are no longer living. Often times, when parental death occurs the responsibility of the disabled child falls on the siblings, other family members, or the community.

The plan may include:

  • General instructions for the care of the disabled child.
  • A special needs or supplemental trust.
  • A life insurance policy.

General Instructions for the Disabled Child

The parents may leave general and specific instructions. The parents may wish to leave instructions regarding:

  • Where the child should live, either with a family member, a sibling or in a group home.
  • Who will be in charge of the disabled child and will make day-to-day decisions for the child.
  • Who will be in charge of the funds left for the disabled child and the distribution thereof.

Special Needs or Supplemental Trusts

A trust that is set up for a disabled child is usually referred to, as a special needs trust or a supplemental trust. In the case of a special needs trust another individual is in charge of the distribution of the proceeds of the trust because the disabled child or adult is unable to manage the money properly.

Congress has enacted laws making it much more difficult to create a trust for a disabled child or adult after receiving an inheritance, making it even more important that the parents create the trust as part of their estate plan.

Some parents choose to leave the money for the disabled child to another sibling. Generally, this is not a good idea. Leaving the money to a sibling for the benefit of the disabled child may place the sibling in a difficult position.

Life Insurance

The parents may consider purchasing a life insurance policy for the disabled child to fund a special needs trust or for themselves to provide for the disabled child after the parents have passed. Life insurance is a good tool to assist in providing for the disabled child. However, the parents should make sure that they purchase an adequate amount of life insurance for any potential future costs.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.