Leaving a Legacy, Part 3: When Special Needs is a Part of Your Life

Much is written about the technical aspects of financial planning for individuals with special needs, such as how to maximize the RDSP (Registered Disability Savings Plan), navigate ODSP (Ontario Disability Support Program) and get the Disability Tax Credit. However, not as much is written about the ‘softer’ side of estate planning for dependents with special needs. As we stated in our Leaving a Legacy article, “To create a good estate plan you need to establish the goals of the wealth first, and understand the dynamics of the family itself.” In the case of special needs planning, there is added complexity which makes these ‘softer’ elements even more important.

Division of Assets

Most typically, parents divide their estate equally among their children. For parents with significant wealth, an equal share might be sufficient, or even excessive, for a child who has special needs. Equal division, however, may not be the best solution if an equal share is not enough to provide for an individual incapable of providing for themselves. Properly estimating the amount of capital that will be required so that a child with special needs can live without reliance on social assistance is important when considering how to divide assets. One way to estimate this is to do a cash flow and net worth projection for that child alone, and then incorporate the results in the parents’ estate plan to determine if an equal split of assets is appropriate.

Trustees

In the case of trusts – either inter vivos (living) or testamentary (upon death) – you need to name trustees. In particular, if you have set up a Henson Trust for your adult child with a disability, the trustee will need to understand the implications of managing the income your child receives from the trust such that it doesn’t significantly interfere with the government support your child receives. Certain disabilities come with a shorter-than-average lifespan. What happens to the money if the child themselves die? Once a child is no longer a minor, they should also have a will which will determine what should be done with the Trust assets. Once you choose a trustee, consider introducing them to your financial planner, and even invite them to meetings when discussing the Trust(s). The Trustee will feel more prepared to take on this responsibility, and feel more confident that they can manage the Trust according to your intentions.

Letter of wishes

A letter of wishes is not legally binding, but will let the courts, family and future caregivers know what kind of life you hoped and dreamed for your child, and could affect decisions they make. It can include basically anything you want. But make sure it does not contradict your will. Here is a list of some items to consider when creating a letter of wishes:

• Your child’s medical history
• Living arrangements both short term and long term
• Key people in your child’s life and relationships you want nurtured
• Information on current and future entitlements for your child
• Information on Trusts you’ve established
• Instructions for the Trustee in the proper use of money left in the Trust
• Guidance on what to do when circumstances change

Most importantly, document your child’s passions, joys, hobbies and your hopes for your child’s life. ⁽¹⁾

The “Talk”

In our Women & Wealth session about Leaving a Legacy, much time was spent on encouraging parents to discuss their financial wishes with their heirs, the point being to minimize surprises and misunderstandings after the parents die. It cannot be more true than in the case of siblings of a child with special needs, especially if the division of assets decision results in an unequal split. Here, understanding family dynamics is key. Even in the most challenging relationships, having these discussions while you’re alive is significantly better than waiting until you’re dead and have no more control. You may be surprised by your other children’s reactions and inputs.

Resources

If you are looking at writing or updating your will, a good place to start is with a lawyer who specializes in special needs law and estate planning. For parents with a child with special needs, more frequent review of your will and letter of wishes is often necessary. And, of course, the financial counsellors at Nexus are here to help guide you through the estate planning process from a financial perspective. Minimizing the obstacles that could get in the way of your child living as full a life as possible should be the focus.