Help! My Child Has Too Much Money

If your child has special needs, and they've been able to save some money while they are under age 18, congratulations! That's quite an accomplishment! You should be proud of your child and yourself for making that happen. Recently, I've received several calls from proud parents whose children have managed to amass some five figure investment accounts in their children's names. The children aren't yet 18 (but almost), and the parents have just started to realize that all the careful savings they have done over the years is going to cause a problem. In fact, by the time they call our office, they know they have a problem, but they aren't sure what to do about it. Here's what I tell them (just pretend you are listening in on the conversation. . . .) "Thanks for calling! I'm glad you are starting to think about what's going to happen when your child turns 18. You've probably heard lots of information from different people, and you aren't sure what step to take next. Here's the bottom line . . . . If you are planning on applying for government benefits when your child turns 18, your child is going to have to meet strict income and asset limitations. That means that he or she won't be able to have a bank account or other investment account with more than $ 2,000 in their name. Because your child is already over that threshold, you are going to have to do some benefits eligibility planning to make sure that your child is eligible as soon as possible after they turn 18. Here are your options . . . Spend down the money prior to your child's 18th birthday on things that your child needs; or Transfer your child's money to a pooled trust; or Set up a payback special needs trust for your child and transfer the money into the trust. Option (1) doesn't require a lawyer; option (2) requires the review of a lawyer but is much simpler than setting up a payback special needs trust; and option (3) requires a lawyer-one who knows how to set up the right kind of trust so it doesn't disqualify your child from benefits. What sounds right to you? I also do a lot of listening in these phone calls because I'm trying to get a sense of what is most important to the parents. The answer isn't always obvious, and it's not necessarily dependent on how much money is involved. As a general rule, the larger the amount of money involved, the more likely the parents will decide that it is necessary to create a payback special needs trust with the assistance of an attorney. That's not always the case however. Sometimes, the parent is adamant about preserving every penny for their child, and even if the parents could spend down the money on appropriate items, they want to make sure it is preserved for their child. Hence, the need for either a pooled trust or a payback special needs trust. Some people want to work with a lawyer, while others would rather work with one of the several well-run pooled trusts available in Illinois such as DayOne Reliance. In any event, I enjoy counseling parents about their options and helping them come up with a solution.