Parents of children with special needs face unique challenges in raising their children. One such challenge is the question of what to do when a child with special needs turns 18, the legal age of adulthood. It is during the few years after a child turns 18 that the services and programs associated with the public education system end and are replaced by different benefits targeted toward adults. Managing the transition from services for minors to adult care presents one of the greatest challenges for parents of children with special needs. There are a number of paths parents can take to ensure that their adult child is best provided for in the future.
First, parents must ensure that there is someone who is authorized to make monetary and health care decisions for their child once she reaches majority age. One such option is to pursue a guardianship. This process involves hiring an attorney and providing medical proof to the court of the child’s legal incapacity, among other things. At the conclusion of the process, if the court declares that the child is incapable of making decisions on her own, they will appoint the petitioner (usually the parent) as guardian. Following appointment, the guardian must make periodic accountings to the court, to ensure that she is acting in the child’s best interest. Courts typically require that guardians ask for court approval before making any large-scale decisions regarding a ward’s finances or living situation.
Alternatives to guardianships exist that can help avoid the cost and burden of guardianship. If the 18-year-old has adequate capacity and understanding, she may execute a durable power of attorney giving an agent the power to make many financial decisions. She may also execute a health care proxy designating an agent to make health care decisions on her behalf. These documents, when properly drafted and executed, are usually sufficient to prevent a parent from having to resort to guardianship if their child’s decision-making ability becomes more limited later in life.
Another concern for parents of children with disabilities is continuing health care coverage. Once a child turns 18, her own income and assets factor into the calculation for Supplemental Security Income (“SSI”). If a child has more than $2,000 in assets when she reaches the age of 18, she will be ineligible for SSI. To avoid this situation and allow the child to maintain her SSI and Medicaid benefits, a parent, grandparent, guardian or the court has the power to create a trust, known as a “first-party” supplemental needs trust (“first-party SNT”) to hold her savings. Any assets held by the trust do not count towards the $2,000 asset limit for SSI, allowing her to qualify. One requirement of a first party SNT is that when the beneficiary passes away, any funds remaining in the trust must be used to reimburse the state for the benefits which the trust beneficiary received during her lifetime. More recently, ABLE Accounts, established under the ABLE Act, allow people with disabilities who became disabled before they turned 26 to set aside up to $15,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. These accounts can be used to pay for qualifying expenses of the account beneficiary, such as the costs of treating the disability or for education, housing and health care, among other things. Certain restrictions apply to ABLE accounts, including the limitation of $100,000 in total funds.
In addition to preserving the child’s own assets, parents want to be assured that their child can benefit from additional services being paid for by themselves or others without compromising the child’s eligibility for government benefits. Many families create trusts known as “third-party” supplemental needs trusts (“third-party SNT”). For a third party SNT, families must fund the trusts with their own assets, not with their child’s funds. A requirement of the trust is that the trustee is given complete discretion to distribute the funds for a beneficiary’s care. As long as the trust is properly drafted and executed, the funds held in the trust will not count as the child’s assets. Furthermore, these trusts do not have to contain a payback provision, allowing families to place significant amounts of money into the trust without worrying that the government will receive a large portion later on. The trusts can then provide a child with special needs with “supplemental” services and care, in addition to those provided via government benefits. Many parents choose to provide for their child’s continued maintenance by funding the SNT with life insurance proceeds.
The transition to legal adulthood presents parents of children with special needs with various hurdles, including transitions in terms of benefits programs, education, and medical coverage. Whenever this transition occurs, it requires careful planning and extensive research regarding the options available in the particular community. Fortunately, with proper planning and assistance from professionals in the field, these transitions can be smooth and can open up new opportunities for individuals with special needs and their families.
Ronald A. Fatoullah, Esq. is the founder of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Eva Schwechter is an associate attorney with the firm. The law firm can be reached at 718-261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also a partner with Brightside Advisors, a wealth management firm with offices in New York and Los Angeles.