Monday, November 14, 2011

Making the Best of the Worst Case Scenario

I've been putting off this post for a few days now.  I'm pretty sure it's the subject matter. (It would have to be.  What else would drive me to cleaning instead?)  Not only does financial stuff, as a rule, make me want to stick a pen in my eye, but I'm not very keen about thinking about my own death either. However, when you have children, these things have to be thought about and planned for.  Normally you think in terms of a child reaching the age of majority, providing for schooling and then hoping for the best if they have to strike out without you after that.  You hope that whatever time you had with them will prepare them for life.  What if that child has a learning disability?  What if that child has Down syndrome?

Recently my husband was able to attend a Will and Estate planning session that was tailored specifically for parents of children with Down syndrome.  I was unable to attend, however I did get the crib notes version and the literature to peruse.  Of course, I then started poking around to see what I could come up with.

I won't go into too many specifics as it will depend on the laws of your area, but there are a few subjects that seem universal and should be considered by parents of children with Down syndrome.  One of the first major hurdles, at least for me, was to appreciate that we don't know how independent Wyatt will be at this point.   It is also too much for me to assume that he will live with one of his siblings.  It is a nice thought and I would hope that would be the case, but it realistically may not be possible (due to schooling or specific needs or even Wyatt's desire for independence).

I had a lot of questions.  Who would look after Wyatt?  Who would pay for his housing, clothing, medical expenses, things that affect his day to day life?  How would this impact any government funding if he would need it?  Luckily, these sort of things have been addressed and are pretty much a matter of routine.

Unlike your average trust fund which turns into assets at a certain age or when certain criteria are met, many countries have created trust funds specifically for people with special needs.  These trusts will allow the beneficiaries to continue to live with dignity, yet not be burdened with the administrative aspects.  A trustee is appointed;  that person or organization would see that the monies are dispersed as needed.  

There is some government funding for adults with learning disabilities, at least here in North America, which is mostly income based.  As the person themselves do not have access to their trust, it is not considered income and therefore does not disqualify them from receiving funding.  Here in Canada we have a few options, including  RDSPs and a "Henson Trust" which is an absolute discretionary trust, where you can dictate all the specifics of how and when the money is applied.   You also may want to consider options that deal with money coming in from outside sources (such as family, interest, donations, that sort of thing).  Many grandparents like to set up bank accounts for their grandchildren;  even something as well meaning as this might interfere with funding and be considered as assets.  Instead, suggest to well wishers to contribute to an RDSP in the child's name.  As a side note, unlike RRSPs and RESPs, a RDSP's funds are not totally taxed when they are dispersed upon maturity.  Only any growth and government contributions are taxed and at a lower rate.  There are also things such as pensions and life insurance policies to consider, where naming a child with a disability as a beneficiary would actually work as a disadvantage.  Instead, one would name the trust fund as a beneficiary.  It would be a shame to lose well intended (and possibly much needed) funds to taxes and the like. 

Flexibility seems to be a common theme as well.  With this type of trust, you can dictate how to proceed for almost any possible scenario that you can think of.  In the event that your special need child passes away prematurely, where do the funds go?  What if your child marries? Divorces?  Is outlived by their spouse?  These questions (and a million more) can easily be addressed by an absolute discretionary trust (or Special Needs Trust for our American friends).

I'm not a financial expert and don't ever plan to be. I will however, allow those that are to figure out how to do what I want to do with Wyatt's financial future.  There are people that specialize in Disability Law and I encourage everyone to seek them out.  I am also not wealthy by any stretch of the imagination. I was very relieved to learn that it was a matter of routine to set up safety nets for my son that were independent of how much money I was making and not that much different from the considerations I would make for my other two children. I was also happy to learn that this wasn't something that I should have been doing already, it is something that I can start at any time. It is comforting to know that when I am no longer here, Wyatt's needs will be met.  Don't get me wrong, I plan on being around a long, long time.  If I'm not tho', all my kids will be looked after.  This was one of the nagging things that haunted me after he was born;  thanks to this information, (if you can pardon the horrible pun) I can finally lay this one to rest.


  1. You are so right. This is such an important topic that parents need to prepare for. The time just flies by.

  2. So timely - we just signed all of our final paperwork to set up a Special Needs Trust for Nora! I feel very good knowing all of my children will be cared for as we wish if something happens...


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