My Disabled Child is Now 18 – Does Anything Change? Part 2
July 26, 2010
A few weeks ago I wrote about a scenario we are seeing with increasing frequency, the child with special needs who reaches adulthood and how that changes the ability of a parent to protect and/or act for that child. There probably won’t be any noticeable change in the family’s life until a crisis occurs and the parents need to step in and make decisions for the child, decisions all parents of minor children routinely make every day. They are shocked, however, the first time they learn that they no longer legally have the right to do so, and aren’t even entitled to information about their child without the child’s consent.
We discussed guardianship as a possible solution. But if the child resists the process or the doctors and/or the court don’t agree that the child fits the test of incapacity then what do you do? The legal solutions are less than perfect but there are steps parents can and should take.
Every person, with or without special needs, ought to have a power of attorney and a health care directive, designating someone to act on their behalf should the need arise. On the health care side, that means someone who can speak with the doctors and make medical decisions should that become necessary. The power of attorney designates an agent to make every day financial decisions such as moving money between bank accounts, writing and depositing checks, applying for government benefits, communicating with creditors etc.
Parents of a child turning age 18 ought to encourage and arrange for that child to execute these documents as a significant step towards being a responsible adult. It can be a positive experience for a child who feels the pull of independence. Part of that independence is putting a support system in place of family and friends who they can rely on for help should the need arise. The parents should emphasize that this necessity is not unique to children with special needs. Parents should explain to Jimmy that Mom and Dad have a similar plan in place. It is something all responsible adults have.
And as I have discussed in previous blog posts, the creation of a special needs trust is so important because if the parent dies without protecting the child’s inheritance then there is a high degree of probability that those funds will be mismanaged by the child, or by those preying upon him/her, leaving the burden upon other family members to provide support. Additionally, a failure to protect the assets properly may disqualify the child for valuable government benefits.
By addressing these issues before a crisis occurs, in a positive manner, very often the child won’t see it as a limit on his/her eagerly anticipated independence but rather a natural step in the process.
Will I Lost My Family Business if I Need Long Term Care (Part 2)
July 19, 2010
So, we were discussing Joe’s situation last week. He owns a business and a building which rents space to his company and 3 other tenants. Their combined value is $1.25 million dollars. As we learned last week these assets are countable for Medicaid purposes as assets that need to be spent down. Joe has a real problem.
He tells me that he doesn’t want to sell the business or the building. He has a will that leaves both to his sons. “But”, I explain, “if he needs long term care he will have to sell both before he or Mary can qualify for Medicaid. Joe becomes exasperated. “My sons support their families through the business, just as I did. I can’t sell it now.”
I hear what he is saying. More than simply an asset, the business is also the income that supports 2 families. Yet, Medicaid doesn’t look at it that way. Which is why Joe ought to strongly consider transferring both the business and the building out of his name now. Careful consideration must be paid to the tax consequences but using some of the strategies we have discussed previously in this blog can protect Joe and his family.
Medicaid transfers carry a 5 year look back so the time to start transferring is now, while Joe and Mary are still healthy. There are gift and estate tax consequences to making transfers. Joe and Mary can make lifetime gifts of up to $1,000,000 each before having to pay gift tax so they should be able to transfer these assets without paying tax. They may also be able to eliminate the possibility of estate taxes by employing certain tax strategies.
If Joe wants to continue to receive the income generated by each asset he has some options. He could transfer ownership to a trust set up so that he receives the income from anything held in the trust. On the other hand, he can choose to continue to receive a salary from the business and rental income from the building as an employee. He’ll need to consult with his tax advisor to see which way is best.
But by putting a plan in place now to protect both he and Mary should they need long term care he is also preserving the financial viability of his company, which is critical to 3 generations of his family. Just another example of how long term care has the potential to destroy a family unless you are prepared for it.
Will I Lose My Family Business if I Need Long Term Care (Part 1)
July 12, 2010
Joe built his construction business from nothing. He was able to provide for his family, put his children through college and live a nice life on the income generated from it. Now in his 70’s, Joe doesn’t work much anymore. He goes into the office a few days a week, receives a paycheck, but he has turned over the day to day operations to his sons who have expanded the business. But recent heart surgery and his good friend’s recent diagnosis of Alzheimer’s disease has caused Joe to consider what would happen if he needed long term care. Is his business in jeopardy?
The answer to that is yes. You see, Joe still owns 100% of the business. He estimates that it is probably worth close to $750,000. He also owns the building in which his company is housed and that is probably valued at another $500,000. He receives rental income from the business and 3 other tenants there. He and Mary have other investments totaling $200,000. Joe figures that if he or Mary need long term care he’ll use the investments. When that’s gone he’ll still have the salary plus rental income and his sons will pay for the rest of their care at home through the business.
But, is this realistic? What Joe doesn’t realize is that 24/7 long term care averages about $125,000 per year. If both Joe and Mary need care, that’s a quarter of a million dollars a year. When I explain this to Joe he quickly tells me that there is no way the business can support that kind of expense. Quite frankly, what business can? Joe also tells me that he and Mary don’t have long term care insurance. If they can still get it, I would strongly urge them to purchase it. But if they can’t get it, what then? We’ll look at some of those options in next week’s post.
My Adult Disabled Child Has Turned 18 – Does Anything Change?
July 5, 2010
Last September I wrote a post about a scenario increasing in frequency involving an elderly parent who is deteriorating mentally but has refused to sign a power of attorney or health care directive. The family’s last resort is the guardianship process. A few weeks ago I wrote about how parents who have adult children with special needs ought to set up a special needs trust to help meet the needs of those children. But what so many parents don’t realize is that when their child reaches the age of majority, age 18 in most states, they no longer legally have the right to make decisions for that child.
“But Jimmy can’t possibly make financial and health care decisions for himself”, the parent tells me. “You may know that,” I say, “but the law presumes that Jimmy is competent unless and until a court deems him to be incapacitated.” I then explain the guardianship process by which a judge must decide that Jimmy is in fact unable to make his own decisions and that the person requesting to be appointed his guardian is a suitable person to protect him and act in his best interests.
And as I wrote last year, because we have a strong history of individual rights in this country, taking away the freedom to make one’s own decisions is not something to be considered lightly. Jimmy must be examined by two doctors who must agree that he is incompetent. (The exact process may vary from state to state.) Then the court appoints an attorney to represent Jimmy. The attorney must meet with Jimmy and report back to the court. If Jimmy has the capacity to understand what guardianship means he may object to the process. His court appointed attorney must send the judge a report as to his/her opinion about whether Jimmy needs a guardian and whether the person applying for that appointment is appropriate.
So what happens if Jimmy objects or the doctors or his attorney don’t agree with Mom and Dad’s assessment? Stay tuned. We’ll discuss that next week.
