If you are a parent of an adult child suffering from a mental health or addiction issue, the problems you face are many. Near the top is usually the financial cost.
And along with that is the issue of who will care for the care when you are no longer around. And how will that care be paid for?
A story in the New York Times says there are concrete financial steps that parents can take that won’t worsen their child’s condition, enable an addiction or run afoul of limitations on the amount of assets they can have and still get government benefits.
A place to start is a special-purpose trust, which can provide care for the child and peace of mind for the parents. This trust is different from a special-needs trust, often used to pay for extra things not provided by government programs.
Special-purpose trusts can be used to provide children with a semblance of the life they might have enjoyed were it not for their mental illness or addiction.
The trusts can be used to fill in during periods when things are not going well for the child. It can also ease the burden felt by siblings.
The trusts generally must have someone in charge of distributions. And parents are advised not to include a clause that says the money will go to the child at a certain period of time. That is because the child, even if doing well, could always have a breakdown or relapse.
But some bonuses might be tied to periods of sobriety, for example.
If you have questions about estate planning, feel free to call us for a consultation at (626) 696-3145.