Estate Planning for Parents of Children With Mental Illness

More than one in five U.S. adults and one in six U.S. youth aged 6 to 17 experience a mental health disorder each year.

Many different mental, behavioral, and emotional disorders fall under the umbrella term of mental illness, and they can vary in degree from mild to severe and disabling. If you are the parent of a child with a mental illness, depending on its severity, you may wonder what would happen if you and your spouse were no longer able to care for your child. With thoughtful estate planning, you can ensure that your child can live the most fulfilling life possible, both as a child and as an adult.

Estate Planning for Children With Mental Health Challenges

Planning for the future of a child with mental illness may involve careful consideration of their unique needs and circumstances, depending on how their illness affects their day-to-day lives and long term goals. Proper estate planning can help ensure that if your child needs assistance because of their illness, they will have the resources to thrive even if you are no longer there.

For parents of children with special needs due to mental illness, a special needs planning attorney can help explore options, including:

Psychiatric Advance Directives

A psychiatric advance directive (PAD) is a legal document that allows individuals to outline their mental health care preferences in case they are unable to make decisions due to their illness. A PAD can specify preferred treatments, medications, and even mental health professionals, as well as designate a health care agent to make decisions on their behalf.

For parents, discussing and creating a PAD with an adult child can be a way to respect their autonomy while planning for situations where they might be unable to advocate for themselves.

Special Needs Trusts

Special needs trusts (SNTs) are designed to benefit individuals with disabilities, including mental health conditions, without jeopardizing their eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI). A third-party special needs trust is a type of trust that someone other than the beneficiary, typically a parent or grandparent, creates with funds specifically set aside for the child. These trusts are not subject to Medicaid payback rules if there are any remaining assets in the trust after the death of the beneficiary.

Funds within the SNT can be used for nonessential items and services that improve the child’s quality of life without affecting the child’s eligibility for income-based government assistance.

Discretionary Trusts

A discretionary trust gives the trustee (the person who manages the trust) complete control over fund distributions. This can be essential for a child with a mental health disorder who does not have the ability to manage their own finances. With this type of trust, the trustee has the authority to decide when, how much, and for what purpose the funds are distributed. By setting clear guidelines in the trust document, parents can specify what types of expenses should be prioritized, ensuring that their child receives appropriate care.

Spendthrift Trusts

If a child’s mental illness affects their decision-making abilities or predisposes them to impulsive spending, a spendthrift trust can protect funds from being wasted. This type of trust also restricts the beneficiary’s access to trust assets, preventing them from making withdrawals or using the funds as collateral for loans. Creditors are generally unable to claim these assets to satisfy the beneficiary’s debts.

Key Considerations for Parents

When using these estate planning tools, it’s important to consider the following:

• Selecting the Right Trustee: Trustees play a vital role in managing and distributing funds. They should be trustworthy, financially responsible, and ideally familiar with mental health issues to make compassionate decisions that prioritize the beneficiary’s well-being.
• Collaboration with Professionals: Estate planning for a child with any sort of special needs, including those that arise because of the child’s mental illness, is complex and requires collaboration with legal professionals. They can help structure a trust that is appropriate for the child’s unique needs.
• Setting Clear Guidelines and Successors: Providing detailed instructions on how funds should be allocated and designating a backup trustee can ensure that the child’s needs will continue to be met if the original trustee becomes unavailable.

If you would like to speak with an experienced special needs planning attorney regarding your situation or have questions about something you have read, please do not hesitate to contact our office at 1 (800) 680-1717. We look forward to the opportunity to work with you.

Disclaimer: The information provided above is for general informational purposes only and is not legal advice.