Do you have a mentally or physically disabled child who will need your financial assistance for the rest of his or her life? When you die, do you fear that he or she will be left without a source of financial support?

Unfortunately, the example above illustrates a common circumstance that touches and affects many families. The good news is that there is a way to plan for it so as to provide lifelong care for your loved one.

With the costs of care continually rising, long-term care for an individual can easily reach $60,000 per year, and in some cases with moderate to severe medical issues, that amount can triple. For most families, the cost of even one year of care will deplete or exceed their resources. However, by utilizing state and government programs such as Medicaid, as well as creating certain estate planning devices, one can preserve funds and keep loved ones from being disqualified from government programs because they are deemed to have too many assets or resources.

Medicaid, and programs like it, were created by the government to assist low-income individuals to obtain health care. A disabled child who cannot work certainly could qualify as a low-income individual and receive government benefits.

However, though government programs may provide him with income for basic needs like food, shelter, and healthcare, those benefits are going to be very basic and will certainly not provide your child with certain other essential items or comforts. Clothing, educational programs, and certain therapeutic medical treatments like therapy or valuable social activities will almost certainly not be provided for your child under those programs.

Also, if your child receives income from you or other sources and/or is entitled to an inheritance from you, your child may be prevented from utilizing valuable government programs because he will be deemed “too wealthy”. For this reason, a special trust known as a “supplemental needs trust” must be put into place for your child so that they can combine their own personal assets (or assets they would inherit from family members) with the necessary support they receive from the government to provide themselves with a good quality of life.

A supplemental needs trust can come in several different forms, so consultation with an experienced estate planning attorney is vital. However, the basic idea of the trust is that it is a planning vehicle set up to prevent a person from being disqualified from government programs by diverting the flow of assets away from the person and into the control of a third-party trustee (this can be a family member) who can use the funds to “supplement” the government resources being received. The third-party trustee manages the funds and can use them to pay for things like clothing, education, travel, gifts, entertainment, and even buying a home for the disabled person to live in. There are limitations on what the money in the trust can be used for – for example the beneficiary usually cannot receive discretionary “spending cash” – but with proper guidance the trustee can be trained to utilize those funds to make the beneficiary’s life more comfortable than it would be subsisting only on government funds.

Utilizing the strategies discussed herein, the initial scenario now looks like this: you visited an estate planning attorney to set up a supplemental needs trust estate plan for your disabled child. He is now able to receive applicable government assistance, and be supplemented by any inherited wealth or assistance from you, for the rest of his life.

Navigating the complicated ins and outs of government assistance and supplemental needs trusts is extremely important when you have a family member who is physically or mentally disabled.

Jeffery J. McKenna is a local attorney serving clients in Nevada, Arizona and Utah. He is a shareholder at the law firm of Barney, McKenna, and Olmstead with offices in Mesquite and St. George. If you have questions you would like addressed in these articles, you can contact him at 346-1615 or jmckenna@barney-mckenna.com.