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Trusts for Disabled Persons

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Defining Disability

Disability has no legal definition - nor should it. We all require assistance with some aspect of our lives. Some people require more assistance than others do.

A 'developmental disability' is distinguished from other disabling conditions in that it must occur, by definition, before the affected person reaches the age of 22 years. A developmental disability is expected to continue indefinitely and has a severe impact upon the ability of the affected person to function independently in society. For example, most people with moderate to severe cerebral palsy, mental retardation or autism are considered 'developmentally disabled.'

When we represent a client with disabilities, or the parents of a disabled (adult or minor) child with disabilities, we focus on what assistance the disabled person requires and how we can facilitate the continuation or improvement of that assistance. For example, a person with a severe disability may be unable to manage his or her own financial resources. One way to assist that person may be to establish a trust for his or her benefit. (See below)

What Planning Should A Parent Do For A Child With A Disability?

Parents of an adult or minor child with disabilities need to plan for (a) personal and (b) financial assistance and management for their child. 

  1. Personal Assistance. A very severe disability can often result in the inability to make personal and health care decisions. For minor children, these decisions are most often made by their parents. For adult children with disabilities, the parents have often become the court-appointed guardian for the disabled person and can make all the necessary decisions about the person´s care, placement, personal and medical needs.

    The important planning issue is 'what will happen when the parents die?' Who will become the personal decision-maker (guardian) for the child with disabilities? Ultimately, the decision to appoint a successor guardian (for a minor or an adult child with disabilities) is made by a court. However, the court places great weight in the choice of the deceased parent and guardian. Therefore, it is very important for the parent to make his or her wishes known to the court. The most common method is to include language in the parent´s Will recommending the appointment of the parent´s first choice (and at least one alternate) as successor guardian for the child. (Important Note: This is one reason why Wills are so important for parents with minor or disabled children.) Click here for more information about Wills.
     
  2. Financial Assistance. As mentioned above, a person with a severe disability may be unable to manage his or her own finances. Financial assistance is often provided by a parent or trusted family member serving as a Power of Attorney or as a court-appointed conservator. If a conservator has been appointed, the parent needs to take steps to let the court know the parent´s wishes regarding the appointment of a successor conservator upon the parent´s death.

Many parents wish to leave an inheritance to their disabled child. We recommend establishing a trust for the benefit of the child. The two most common trusts for a disabled child are (a) a discretionary support trust and (b) a special needs trust.

What Is A Discretionary Support Trust?

A trust for a (minor or adult) child with a disability can be established by the parents during their lifetime (living trust) or it can take effect after both parents die (testamentary trust). A testamentary trust would be included as a part of the parent´s own Will or Revocable Living Trust.

The trust can provide for the support, care, education, and assistance needed by the disabled child for the remainder of his or her lifetime. The parent appoints a trustee who will have the discretion to make (or refuse to make) payments for the benefit of the disabled child. This is commonly called a 'discretionary support trust.' This arrangement will adequately provide for a person who cannot manage his or her own financial affairs.

What Can Happen Without A Trust?

Without a trust for a child with disabilities, the funds left by the parents could be quickly dissipated or misused by the child. Also, the disabled child might become the victim of undue influence and/or financial abuse. A discretionary support trust is one of the best methods for preventing financial harm to the child.

Upon the parent´s death, the court may require the appointment of a conservator to manage the assets of the disabled child. A conservator is restricted by law, must be bonded, and is required to file annual accountings with the probate court. This is an expensive and time-consuming option. Again, the trust may be able to prevent this.

What About Public Benefits And Special Needs Trusts?

Often a person with a disability is receiving some form of public assistance and/or benefits. There are several government programs that provide assistance to people with disabilities. This help may take the form of cash, medical assistance, housing, or food.

Some of these programs, such as Supplemental Security Income (SSI) and Medicaid, have financial eligibility requirements. There may be resource requirements that limit the amount of assets a person can own and still be eligible for the program. Similarly, if monthly income is too high, it may affect eligibility for benefits.

A person with a disability who is also receiving public assistance benefits, may require the establishment of a Special Needs Trust both to provide financial management and to ensure that the person will continue to be eligible for government programs.

Who Should Be The Trustee?

A trustee can be a private person, such as a relative of the disabled child, or a professional trustee can be named, such as a bank, financial institution or small business that offers fiduciary services in the local community. In some cases, both a family member and a professional fiduciary are named as co-trustees.

Choosing the trustee for a disabled child is an important decision. The trustee will have an ongoing relationship with the child and it is paramount that the trustee be sensitive to the child´s needs and take the time to understand his or her unique situation. The trustee must also exercise good judgment when making distributions and be knowledgeable about the impact of distributions on the disabled child. In addition, the trustee must be a prudent investor and good with record keeping and paperwork. Being a trustee is not an easy job.

DISCLAIMER:The information contained in this website is based on Oregon law and is subject to change. It should be used for general purposes only and should not be construed as specific legal advice by Fitzwater Meyer Hollis & Marmion, LLP or its attorneys. Neither this website nor use of its information creates an attorney-client relationship. If you have specific legal questions, consult with your own attorney or call us for an appointment.