As a mother of three children, including one with a severe developmental disability, Laurie Geschke admits that looking into the future was not something she did before her children became adults. It was only then that she and her husband began seriously contemplating their wills.
Planning for the care of their disabled daughter took on new urgency, however, once the Vancouver resident learned more about estate planning for parents like her.
"The future was not something I looked at when she was young," Ms. Geschke says of her 31-year-old daughter, who is autistic and selectively mute. "We spent all our young years, when we had energy, getting through the day and getting through school. We have other children who are grown, and we are no longer responsible for them.
"With my daughter with disabilities, my responsibility for her doesn't end when I die; it ends when she dies. That's something parents don't understand unless they are in our situation.
"It's a huge amount of stress."
While financial planning can be daunting at the best of times, it can be especially so for parents of children with mental or physical disabilities. That kind of preparation goes far beyond basic budgeting.
"Realistically, every parent who owns anything should have a will," Ms. Geschke says. "For us, we didn't get to our wills until way late because we couldn't think about the possibility that we wouldn't be here to raise our kids."
Today Ms. Geschke leads workshops, with a lawyer, that cover wills, trusts and other plans for people with disabled inheritors for the Planned Lifetime Advocacy Network, or PLAN. The Vancouver-based organization helps people secure the future of their children with disabilities, and also advocates to shape policy and benefits for people with disabilities across Canada.
These parents and guardians must pay rigorous attention to detail in their finances. That's especially true for families whose children have a limiting disability that isn't severe enough to qualify for governmental support.
"Those folks are going to have the toughest financial journey," says Timothy Ames, executive director of PLAN. "They're sort of in this grey zone. There's no 'best' situation, but if somebody has really severe developmental or physical disabilities, they're going to qualify for a lot of support and benefits, so the financial burden on the family will potentially be a little bit less."
The first thing families with a disabled child should investigate, Mr. Ames says, is the federal registered disability savings plan (RDSP). It encourages parents to save for their children's long-term financial security. The lifetime contribution limit is $200,000, excluding grants and bonds. Contributions can be made up to the end of the year the beneficiary turns 59, and the Government of Canada pays a matching Canada Disability Savings Grant annually of $3,500, in most cases.
"The RDSP is the greatest savings vehicle we have in Canada for people with disabilities," Mr. Ames says.
An RDSP is not the only solution, however, says Gordon VanderLeek, founder of Calgary-based VanderLeek Law. He and his wife, Annie, adopted five children, now aged 21 to 29, with a range of disabilities. Mr. VanderLeek supports Annie in her role as a disability advocate on applicable legislation and regulations.
"Typically with parents of special-needs children, they're putting all their resources into the kids and there's usually not a lot of savings," he says.
Parents need to assess the needs of the child and determine the expected financial requirements for that child when they're not around, Mr. VanderLeek says.
"If you had to pay somebody to do everything that mom and dad do, what would that cost? What would a monthly cash requirement look like, and what would a budget look like? You really need to determine the burn rate of how much cash you need."
The next part of the analysis is determining how much capital must be set aside to provide for that cash requirement, taking into account the life expectancy of the child.
Determining the size of your estate – including home equity, RRSPs, insurance policies and so on – is only part of the equation. Another is the allocation of that estate. Some parents might be able to provide for equal distribution among their children, while others must consider unequal distribution between the disabled child and non-disabled siblings.
"A child can make a legal claim against the estate if they can say, 'I don't have enough money,' or I'm going to run out of money,'" Mr. VanderLeek explains. "There's a legal risk. The judge has jurisdiction to order a certain amount of money be set aside for the benefit of that child, and under certain terms and conditions can order a different distribution under the estate."
In other words, the judge can rewrite the will. "It's important for parents to get legal advice on how to mitigate that risk because that's not a pleasant experience for a family to go through."
More importantly, Mr. VanderLeek says, parents should make provisions for their disabled child beyond the legal requirements.
"They want to make sure their child is going to be okay, that their child is going to have proper accommodation, enough food and clothing, money for entertainment or respite, adequate money available in a trust fund to ensure that the appropriate services are in place."
The cornerstone of a financial plan is a properly structured testamentary trust that provides the trustee with flexibility to adjust payments and beneficiaries based on changing requirements.
Parents of disabled children also need to perform more frequent reviews of their financial and estate plan than others, Mr. VanderLeek says.
"The financial requirements for a child may change; their own financial situation may change," he notes. "In Alberta, we're going through a downturn and people are losing their jobs. They might lose their entitlement to group insurance that they were counting on to look after their disabled child."
Rules under government programs and tax schemes may change, too. "Don't just do an estate plan and stick it in a filing cabinet and let it collect dust. There could be a problem, and no solution except having to go to court, which can be very costly and time-consuming.
"A good estate plan," he adds, "will evolve to account for changing family circumstances."