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Relevant Practice

• Trusts

Life can be demanding and confusing for a family with a disabled (special) child. There is little time to do everything in a day that needs to be done. Financial and future personal care planning usually gets put on the back burner. Planning for a special child differs from normal planning to the extent that the special child's needs are likely to be greater than other children and may last for a lifetime. The potential resources available to meet such needs include complex governmental assistance programs, such as Supplemental Security Income (SSI) and Medicaid, and there are generally unique and continuing financial management and personal care considerations.

The family with a special child has many concerns about the future, represented by some typically asked questions:

All too often these questions arise in a time of crisis, such as a child's attainment of age 18, upon the death of a parent or grandparent or the loss of certain governmental benefits due to improper planning. If parents take the time to properly coordinate personal and financial planning, families will not be forced to make compromising decisions in a crisis situation.

Personal Care Alternatives 

In Louisiana, parents are the natural guardians (tutors) of their children until they reach age 18. However, once a child is 18, the child is an adult in the eyes of the law, fully capable of making his or her own medical and financial decisions unless determined by a proper court to lack some or all capacity to make decisions.

1. Continuing or Permanent Tutorship

If a child who is between ages 15 - 18 possesses less than two-thirds of the average mental ability of a normal person of the same age, the court in the parish where the child is domiciled may enter a decree of continuing tutorship granting continuing authority to the tutor to act for the child after the child reaches age 18. The continuing tutor has the authority to give consent for any medical treatment or procedure or any educational plans or procedure and to obtain medical, educational or other records. The continuing tutorship is less expensive and time-consuming than an interdiction or guardianship proceeding (discussed below). However, a special child under a continuing tutorship has full power to administer his or her financial affairs after age 18, subject to certain restrictions, such as the inability to sell or mortgage real estate without court approval, the inability to make gifts of his or her property and the inability to legally obligate himself or herself for any sum exceeding one year's revenue.

2. Interdiction (Guardianship)

A child age 18 or over who due to an infirmity is unable to make reasoned decisions regarding the care of his or her person or property or to communicate those decisions is a candidate for a limited or full interdiction (guardianship). A curator (guardian) is appointed by the court to represent the child in his or her affairs as a substitute decision maker. Unlike a full interdiction, a limited interdiction only deprives the child of those rights specifically set forth in the court's judgment of limited interdiction. 

An interdiction proceeding is an adversarial proceeding before the appropriate court. The child sought to be interdicted must be represented by his or her own legal counsel, or counsel appointed by the court. The interdiction proceeding requires notices, hearings, qualification of the curator by posting security required by law and taking an oath of office, court authorization for acts by the curator and post-judgment monitoring and filing of annual reports and accounts with the court. 

Usually, parents will have themselves appointed as curators. Once the interdiction is in place, if the parents die or become unable to serve, a replacement curator can be appointed with minimum delay since the issue of the necessity for interdiction already has been resolved. The appointment of a competent curator may be very important since it may mean the difference between the child continuing to live in the community with both advocacy and access to services or having to move to an institution.

3. Letter of Intent ("Life Plan")

A Letter of Intent is an informal document written by the parents or other family members that describes the child's history and background, the child's current status and parents' wishes, hopes and desires for their child's future when the parents are gone. It gives future caregivers some insight on medical care and treatment, names of professionals (physicians, caseworkers, attorney, etc.), housing options, daily living skills, education, preferences on religious upbringing, personal needs, social and recreational needs, and the rights and values which the parents want accorded to their special child. Even though it is not a legal document, it provides guidance and information which future caregivers vitally need. It should be updated on a regular basis.

Financial Care Alternatives

A permanently disabled child, regardless of age, is a forced heir in Louisiana, entitled to inherit a percentage of their parents estates depending upon the number of other children who may be forced heirs either because such other children are under the age of 24 or also permanently disabled. For example, if the special child is the only forced heir, the forced portion is one quarter. Many special children will lack the ability handle an inheritance, whether it is the bare minimum required by forced heirship laws or more. Therefore, it is important that parents with a special child have a properly drafted Will.

1. Wills and Trusts

A Will can provide that the special child's inheritance will be held in trust. The trust designates one or more Trustees (individuals, banks, or both) who act as fiduciaries and are required to preserve, manage, invest and distribute the trust funds for the sole benefit of the special child in accordance with the terms of the trust. The trust can stipulate the powers and duties of the Trustee, when income or principal distributions are to be made and under what conditions, and the types of investments the Trustee can make. A trust can serve as a Will substitute for a special child who lacks the legal capacity to make a Will by providing that if the special child dies without a Will and without children, the trust assets will be distributed to others, such as the child's siblings. A carefully drafted trust which grants sufficient discretion to a capable Trustee affords a significant degree of flexibility to assure the special child's needs will continue to be met, even in face of changing and perhaps unforeseen personal, social or legal conditions. One of the most difficult decisions is the selection of the Trustee - someone who is capable of managing the trust assets and who also is willing and able to assume an active role in the provision of proper personal care for the special child.

2. Special Needs Trust

Government support may be necessary to cover the cost of medical care and living expenses for many special children and their families. Two primary governmental programs are Supplemental Social Security Income (SSI) and Medicaid. SSI pays qualified disabled individuals or their representative payees a monthly income to subsidize the cost of food, shelter and clothing. Medicaid pays health care providers for medical costs incurred by the disabled individual. For disabled individuals who are unlikely to be gainfully employed and who may have substantial current or future medical costs, it is important to preserve these governmental benefits.

SSI and Medicaid are financial need-based programs. In order to qualify, the disabled individual must have limited countable assets and limited income. If the disabled person has more than $2,000 of countable assets, the person generally does not qualify for either program until the person spends down his or her countable assets to $2,000. Thus, an inheritance, whether by virtue of Louisiana forced heirship laws, Louisiana intestacy laws, bequests under a Will or as beneficiary of life insurance or retirement benefits, may disqualify the special child for SSI and Medicaid. Any attempt to waive or renounce an inheritance is disregarded by Medicaid and SSI.

Again, a properly drafted trust is the solution to the preservation of these governmental benefits. Under current SSI and Medicaid guidelines, a "special needs" or "supplemental needs" trust ("SNT") created by parents or others in a Will for the benefit of a special child will not be a countable resource, regardless of the value of the inheritance. An SNT differs from an ordinary trust by providing that the purpose of the trust is to supplement the needs of the special child beyond the benefits provided under governmental assistance programs to improve upon the child's quality of life. The Trustee is directed to consider all sources of funds available to the child to meet the child's needs, including governmental assistance, before making discretionary distributions from the trust for special needs. Special needs could include medical, dental and diagnostic work or supplemental care and rehabilitative services not covered by Medicaid, expenditures for travel, companionship and cultural experiences, the expenses of special transportation, etc.

For more information please view the publication: Special Needs Trusts.

3. Nonprobate Assets

Certain assets, such as life insurance, retirement plans, IRAs and annuities, pass outside of a Will. Benefits are paid to the beneficiary designated on forms supplied by the insurer, retirement plan or financial institution. One common error for parents with a special child is to name the surviving spouse as the primary beneficiary of life insurance and retirement benefits and name either "my children" as secondary or contingent beneficiaries or fail to designate any secondary beneficiary. In the case of a common disaster or if the primary beneficiary dies first and no change is made to the beneficiary designation, a special child will receive substantial benefits, regardless of a properly drafted SNT under the parents' Wills. This creates the problem of managing the benefits as well as the loss of SSI and Medicaid. These types of assets must be coordinated with the overall planning, such as making the benefits payable to the trust created under the parents' Wills rather than payable outright to the special child.

Conclusion

Hopefully, this information will increase your awareness of the need to plan for a special child by seeking competent legal counsel who is familiar with the legal tools available to accomplish your goals and preserving governmental benefits. Failing to plan ahead is a plan for failure. Parents should establish a comprehensive plan before a crisis develops to transition the personal and financial care of their special child when they no longer are able to provide for such care.