When making your estate plan, be aware that there are substantial risks to leaving your estate to the sibling of your child with special needs. Sometimes, doing so seems like the least complicated solution – the sibling can use funds from your estate to pay for care and expenses of the child with special needs, and you avoid costs such as payments to a trustee or the cost of establishing a special needs trust. You may not have considered some potential problems when these funds are not specifically allocated to your child with special needs.
Mismanagement of Funds
You likely would not be considering leaving your estate to your child with special needs’ sibling unless you trusted the sibling to take care of your other child. Unfortunately, managing money for people with special needs can be difficult and time-consuming. With your estate in the sibling’s name, your child with special needs has no legal entitlement to the money, which can cause problems with money mismanagement. For example, the sibling may make an unwise investment and lose all the savings that would have supported the child with special needs. A trust may be a better option if mismanagement is even a remote possibility – trustees have fiduciary duties to act in the best interest of the trust beneficiaries.
Claims by the Sibling’s Creditors, Adverse Judgments, and Bankruptcy
Should your child with special needs’ sibling have existing debts when he inherits your estate, or should he later fall into debt, his creditors can seek to collect from all of his assets – including the money he inherited from you. The same is true if the sibling loses a lawsuit or files for bankruptcy. Consider whether you anticipate that the sibling will have significant debts in the future, including student loan debt, which is not dischargeable in bankruptcy.
Is the sibling married or planning on getting married? If he or she divorces his or her spouse, the divorce court may order alimony or child support to be paid. Assessing how much alimony or child support is owed accounts for all a person’s assets – including the money inherited from a parent.
Sibling Death or Disability
If the sibling dies or develops special needs of his own and does not have an estate plan tailored to maintain care for the child with special needs, the money you gave to him could become tied up in probate court. The sibling might need the money himself to pay for his own care. Sibling estate plans will be covered in a future article.
Moral Obligations and Family Conflicts
Finally, moral obligation or family loyalty may cause issues if a sibling inherits your entire estate. The sibling may wonder if he can use some of the money to support his own family or pay off debts to make life easier for the entire family, or if he must use everything on his sibling with special needs’ care. He may have conflicts with other family members who did not inherit and do not understand where the money is going.
Have you considered all of the risks above and still want to give your estate to a sibling for future care of a child with special needs? We suggest speaking to an attorney about how to best structure your estate to accomplish your goals.
Rubin Law is the only law firm in Illinois exclusively limited to providing compassionate special needs legal and future planning to guide our fellow Illinois families of children and adults with intellectual disabilities, developmental disabilities, or mental illness down the road to peace of mind. For more information, email us at firstname.lastname@example.org or call 866-TO-RUBIN.