Estate Planning for Adult Children with Mental Illness
Having a child with a mental illness can be very hard on a family. There usually needs to have special considerations for educational, medical, and other needs for the child which can sometimes affect the other siblings who are impacted by their sibling having unpredictable behavior. When parents are creating an estate plan, they usually have to be cautious of what to leave their mentally ill child and the manner in which everything is left. For example, if you leave funds to a mentally ill child, there is a chance that the funds will be quickly spent. Research has found that people with mental illness are more likely to fall for scams, relatives tricking them out of their money, and spending their money on worthless items or drugs and alcohol.
Another aspect parents may need to figure out if how to support a child that may not be able of supporting themselves. If the child suffers from bipolar disorder or schizophrenia and will not be able to work, they may be able to receive public benefits like Medicaid and SSI. If the parents leave assets to this child in a poorly-designed trust or will, they could risk the child being able to receive these benefits, even if the inheritance is only a few thousand dollars.
Parents are able to leave a large inheritance to their child with mental illness or special needs by creating a special needs, or discretionary, trust which would allow their child to continue receiving public benefits. Federal law states that if the child is under 65 years old, their own personal assets are able to be used to fund the trust. The assets can come from an inheritance or lawsuit settlement and would then be placed directly into their trust, which would be managed by an independent trustee.
Special Needs Trusts
It is beneficial to work with a Folsom estate planning lawyer who is familiar with creating special needs trusts to ensure the trust adheres to all laws and rules that are applicable. By creating a special needs trust that adheres to appropriate laws, the government will not be able to take the funds or make the child ineligible to receive public benefits, such as social security, SSI, or Medicaid. For example, the child with mental illness cannot have direct access to the funds or it would be viewed as an income or resource and that would make them ineligible for public benefits. Another restriction that would inhibit the child from receiving public benefits would be if the funds from the trust are used to buy shelter, food, or clothing that the public benefit program would usually provide.
Having a healthcare directive is just as important as finding someone to manage their financial affairs. A healthcare directive would act on behalf of your child to decide healthcare or treatments to benefit them. The financial directive and healthcare directive can be the same person but they can also be separate.
A child with mental illness can cause parents to worry more about their well being once the parents are gone. By creating a special needs trust and finding financial and healthcare directives, it can help children enjoy life and receive the necessary treatment and benefits for their well-being.
Thank you to Yee Law Group for the above information.