The New York Times recently published “For Parents With Troubled Adult Children, Financial Hurdles Abound,”which talks about what can be done to help a loved one stricken with mental illness. It noted that there are many painful and emotional issues in situations of mental illness and addiction that affect children, but also there are financial plans that parents can use, such as a Special-Purpose Trust, that provides care for the suffering child and peace of mind for the parent.
A special-purpose trust is different from a special-needs trust, which is frequently implemented to pay for additional needs of those receiving government benefits where the government has strict restrictions on the recipient’s assets. A special-purpose trust can be used to provide children more of the life they might have enjoyed without mental illness or addiction, and it allows the parents the flexibility to make changes with the distributions.
Special-purpose trusts are more complicated to establish than regular trusts because of the powers they give to the trustees and the restrictions they place on distributions. However, the toughest part of creating a special-purpose trust is getting parents to accept them as necessary: parents must first acknowledge that their children will never fully recover.
Parents are advised to set out some very specific criteria for distributions into trust documents, for example, staying on medication or staying sober for a certain period of time. In addition, those with a family history of mental illness and addiction issues should get a power of attorney and health care proxy for children over 18 who are away at college. In the event that something happens to their child, the parents will have access to medical records and will be able to help.
Work through these issues with an experienced estate planning attorney to make sure that you are doing your best to help your child.
Reference: New York Times (August 28, 2015) “For Parents With Troubled Adult Children, Financial Hurdles Abound”
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