FOR ED AND PAT Worff, retirement planning wasn't as simple as salting away money in a 401(k).
The Worffs' 36-year-old daughter, Patty, has a developmental disability. And though she works as a greeter at a nonprofit center, the Arnold couple needed to provide for her financial future, too. In doing so, they had to be careful not to make her ineligible for government benefits.
A few years ago, the Worffs got estate-planning documents in order and set up a special trust for their daughter. Their lawyer also drew up documents for Patty Worff, including one outlining her desires for care if she becomes incapacitated.
Planning has brought peace of mind.
"Both my wife and I are relieved," said Ed Worff, who is 60 and retired. "We know that if something were to happen to both of us, at least Patty's future is insured."
Nearly one in five adults and young children in the United States -- 49.7 million people -- have a disability or long-lasting condition, reported the 2000 census. Years ago, elderly parents relied on relatives to care for an adult child with a disability, experts said.
But with smaller families and relatives often living far away, it has become important for parents to develop a long-term financial strategy for their child.
Often parents put off planning because they can't bear the idea that they won't always be there for the child, said Mary Anne Ehlert, a financial planner in Vernon Hills, Ill., who specializes in planning for people with disabilities.
"Parents want to live one day longer than their child. In reality, that's not going to happen," Ehlert said.
The first step to planning is making a candid assessment of a child's capabilities, she said. From there, parents will have a better idea on what legal documents they may need to secure a child's future.
Estate laws differ from state to state. So do rules on government benefits.
Families generally need a professional in their home state who has lots of experience with trusts for people with disabilities.
Also, the professional needs to know the ins and outs of Medicaid and other programs so planning doesn't derail crucial aid.
Every family is different, but here are issues to consider:
Special needs trust
Generally, children cannot have more than $2,000 in their name to be eligible for government benefits, such as Medicaid and Supplemental Security Income, experts said.
"If you have $4,000, you may have $50,000 in medical bills but don't qualify for Medicaid," said Ron M. Landsman, an elder law attorney in Rockville.
Government benefits pay for basics, but coverage varies across the country. In some states, for instance, dental care isn't part of basic support. Parents often set up a "special needs trust" to pay for care not covered by the government or for extras, such as modifications to a house to provide accessibility.
"A special needs trust can be a stand-alone trust or can be created as part of a will," said David Rosenthal, an American Express financial adviser in Arnold who helped the Worffs.
Rosenthal says the simplest way is through a will. "That creates the most flexibility. You can change any time up until you die," he said.
Some recommend setting up a stand-alone trust so grandparents and others can contribute to the trust over time. (Taxes will be owed on income generated by the trust.)
Sometimes elderly parents like having the trust already in place in case they become incapacitated, experts said.
Set up correctly, the trust won't disrupt aid. It should indicate the assets are to be used for expenses not covered by government benefits. If the trust states the money is for basic support, then the assets must be spent before government benefits can kick in, experts said.
Funding a trust
Money and other assets can be put into a trust, with the trust listed as owner. Again, putting assets in the child's name will trigger a loss of benefits.
Parents with few resources often fund the trust with so-called second-to-die life insurance. The policy is less expensive than some others, allowing parents to buy a bigger benefit.
The trust should be named as the policy's beneficiary. The money is paid to the trust after the second parent dies.
Selecting a trustee
A trustee administers the trust on behalf of the child. It can be a family member, a corporate trustee or a combination of the two. Ehlert advises choosing someone "they trust with their wallet."
A special needs trust isn't cheap to set up, and financial institutions often aren't interested in managing a trust with assets of less than $250,000, experts said. For families with more modest means, some nonprofits have set up "pooled trusts," where money from many families is combined and professionally managed.
Each family has its own account, and earnings are apportioned, like a mutual fund, said Marty Ford, a lawyer with the Arc of the United States and United Cerebral Palsy.
Parents can say what they want the money used for. The trust's manager knows aid rules and won't allow disbursements that would jeopardize benefits, Ford said.
With this document, parents can designate where they want their assets to go, such as the trust. However, some assets, such as retirement accounts or life insurance, are distributed based on the beneficiary of the account or policy. Make sure these beneficiary designations are in order, experts advise.
Wills also are crucial for naming a guardian for minor children. If parents are the guardian for an adult child, they can nominate successor guardians in the will, Ehlert said.
Letter of intent
In this letter, parents can write a child's likes and dislikes, their goals for the child, the names of service providers and key professionals. In other words: "If you are being asked to step into a situation and take over the care of a person, what would you want to know?" Rosenthal said.
Make sure relatives, from children to aunts and uncles and grandparents, know the planning done for the child, Rosenthal said. That way, if they intend to leave money to the child, they will know not to do so directly and cause a loss of benefits, he said.
To suggest a topic, contact Eileen Ambrose at 410-332-6984 or by e-mail at firstname.lastname@example.org.
On the Web
Resources to help families financially plan for a child with a disability:
Planning Now, an estate planning guide by the Maryland Developmental Disabilities Council, www.md-council.org.
The Special Needs Network, www.tsnn.org, a nonprofit that features links to government and family support sites.
Special Needs Alliance, www.specialneedsalliance.com, a referral service for lawyers with expertise in special needs trust.