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Special Financial Planning Techniques Required
By Roger J. Warrum
If a doctor or medical professional has a mentally or physically disabled child, special estate provisions are needed to ensure the continued care and comfort of that child after the parents’ deaths.
Estate Planning
When designing an estate plan for a doctor with a disabled child, it must provide not only financial security, but personal security as well—without jeopardizing the medical practice as a business entity. The plan must allow the child to continue functioning and making some sort of contribution, according to his or her abilities and lifestyle.
Direct Bequests
In some cases, funds left directly to the child at death may be attached and used by the government. Consequently, direct bequests may not be the best option.
If a doctor wishes to leave the child shares in a family business as a means of support, for example, the best way is to establish a trust that will define how the stock can be converted to cash and how that cash will be spent for the benefit of the child.
To represent the child’s best interests, the doctor might appoint a pair of trustees: one with the financial expertise to invest the trust or assets well -and- another individual who will look out for the child’s welfare to act as the child’s guardian.
Spendthrift Trust
A “discretionary” spend thrift trust is used to provide the trustee discretion to decide when the money will be spent and on what spent.
If the trust is set up solely for the “maintenance” of a disabled child, a state organization caring for the child can attempt to attach the funds.
However, if the trust document specifies the money is to be used for the “benefit and enjoyment” of the child, the state usually is unable to attach the assets.
The share of the estate provided for the disabled child may differ from the share of other children. In many cases, a disabled child requires more funds to care for his or her needs than his or her siblings might require.
Important Issues
When designing an estate plan for the parent(s) of a disabled child, a number of issues must be decided:
• To whom does the doctor want to entrust the care of the child?
• What is the doctor’s wishes regarding the child’s development?
• How should the trust be funded; for example the trust could use a life insurance policy or be funded with other assets?
Assessment
The key elements in planning for a disabled child include:
1. Establishing a trust to be used for the benefit and enjoyment of the child, which cannot be attached by a state or institution should the child need to be institutionalized;
2. Helping to select a guardian, specifying more than one in order of priority;
3. Helping to prepare a letter to the guardian stating desires and wishes for the child; and,
4. Planning to fund the trust and determining the amount to be placed in the trust.
Conclusion
Your thoughts, opinions and experiences with this limited-focus topic are appreciated; please comment? What other issues are involved?
Related Information Sources:
Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759
Physician Financial Planning: http://www.jbpub.com/catalog/0763745790
Medical Risk Management: http://www.jbpub.com/catalog/9780763733421
Healthcare Organizations: www.HealthcareFinancials.com
Health Administration Terms: www.HealthDictionarySeries.com
Physician Advisors: www.CertifiedMedicalPlanner.com
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Filed under: Estate Planning, Financial Planning, Funding Basics, Risk Management | Tagged: disability planning, Estate Planning, Financial Planning | Leave a comment »
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