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

Q2 | June 2018

Topic: Wealth Planning

Alexandra Jemetz CIM

June 29, 2018

Image used with permission: iStock/Nastco


Print & Share

Print

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

Q2 | June 2018

We’ve spoken and written a lot about estate planning and leaving a legacy lately. At Nexus, we believe that everyone, no matter how simple or complex your financial situation is, should go through some degree of estate or tax planning. There is always some benefit that results from thinking ahead. For parents dealing with a child who has special needs, it’s even more important.

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.

(1) www.financialwellbeing.ie

More Like This...

See another CRM2 blog post that may be of interest to you.

No posts found.

More Like This...

See another Foundations & Endowments blog post that may be of interest to you.

That Giving Feeling

Topic:
Foundations & Endowments, Tax Planning
Excerpt:
Summer is now a distant memory. In fact, a radio announcer declared only 77 days until Christmas. Ugh. It is usually in the last quarter of the year

More Like This...

See another Human Interest blog post that may be of interest to you.

Is COVID Giving You Scurvy?

Topic:
Human Interest
Excerpt:
The early ocean-going explorers learned the hard way that a lack of vitamin C can give you scurvy. And, according to Wikipedia, “the knowledge that

More Like This...

See another Inside Nexus blog post that may be of interest to you.

Onboarding in a Not So Normal World

Topic:
Inside Nexus
Excerpt:
Starting a new job can be nail-biting! We have all done it at some point in our lives and each time it brings a new sense of excitement, questions,

More Like This...

See another Investments blog post that may be of interest to you.

Nexus and the ESG Integration Approach

Topic:
Investments
Excerpt:
At Nexus, we think Environmental, Social and Corporate Governance (ESG) considerations are a helpful input to our investment decision-making process.

More Like This...

See another Pearls of Wisdom blog post that may be of interest to you.

“Work, Work, Work, Work, Work, Work”

Topic:
Pearls of Wisdom
Excerpt:
This has been a busy year. I’ve had lots happening on the home front (a wedding!) and lots going on at the office (too long to list!) Managing work

More Like This...

See another Tax Planning blog post that may be of interest to you.

The (U.S.) Taxman Cometh

Topic:
Tax Planning
Excerpt:
Like the medical patient who expects to endure a fair bit of poking, probing and prodding from the doctor, clients of financial providers have had to

More Like This...

See another Wealth Planning blog post that may be of interest to you.

Living to 100… Is 100 the New 80?

Topic:
Wealth Planning
Excerpt:
It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all

On a Side Note…

See another CRM2 Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Foundations & Endowments Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Human Interest Nexus Notes Quarterly article that may be of interest to you.

Worth 1,000 Words

Topic:
Human Interest
Excerpt:
A little humour makes the world a better place.

On a Side Note…

See another Inside Nexus Nexus Notes Quarterly article that may be of interest to you.

From the Editor: Springtime

Topic:
Inside Nexus
Excerpt:
It’s official: it’s spring! Ever since people have been telling each other stories, they've used the different seasons as metaphors, and spring evokes

On a Side Note…

See another Investments Nexus Notes Quarterly article that may be of interest to you.

The Tail that Wags the Dog

Topic:
Investments
Excerpt:
We thank our friends at Northwood Family Office for having brought to our attention a fantastic book called, The Psychology of Money, written by...

On a Side Note…

See another Pearls of Wisdom Nexus Notes Quarterly article that may be of interest to you.

A Table for None, Please; Working From Home on the Rise

Topic:
Pearls of Wisdom
Excerpt:
Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some

On a Side Note…

See another Tax Planning Nexus Notes Quarterly article that may be of interest to you.

The (U.S.) Taxman Cometh

Topic:
Tax Planning
Excerpt:
Like the medical patient who expects to endure a fair bit of poking, probing and prodding from the doctor, clients of financial providers have had to

On a Side Note…

See another Wealth Planning Nexus Notes Quarterly article that may be of interest to you.

Living to 100… Is 100 the New 80?

Topic:
Wealth Planning
Excerpt:
It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all