Ten tips for limiting a financial hit from a mental disorder

Published June 4, 2006

Limit financial hit of mental disorder

It can happen to anyone when you least expect it. A child can be diagnosed with autism. An aging parent can be diagnosed with Alzheimer's disease. If a loved one is affected by a mental illness, consider these tips:

1 Assess decisionmaking abilities. Does your family member need help making financial decisions? Be sensitive to how much help your relative needs or likely will need. Allow the person to be as independent as he can for as long as possible.

2 Line up supervision at the right time. When serious decisionmaking help is needed, consult a lawyer to determine whether someone trustworthy should be given durable powers of attorney, guardianship or trustee status over your loved one.

3 Find the right legal help. You can find lawyers who specialize in issues affecting the disabled through the National Academy of Elder Law Attorneys (www.naela.org).

4 Determine eligibility for government help. Your loved one may qualify for Medicaid or Supplemental Security Income. Basic rules for eligibility can be found through the Florida Department of Children and Families (www.dcf.state.fl.us/ess/medicaid.shtml) and the Social Security Administration (www.ssa.gov).

5 'Spend down' wisely. In most cases, your aging relatives would have to impoverish them-selves to qualify for Medi-caid. Be sure to help them pay off bills and debts before they apply. Such obligations are not factored into the government's formula for determining eligibility.

6 Understand the system. Your loved ones would stand a much better chance of getting into a nursing home or assisted living facility they - and you - prefer if they go in as private-pay patients as opposed to Medicaid patients.

7 Look into Special Needs Trusts. You can use such trusts, also known as Supplemental Needs Trusts, to set aside money for specific needs for relatives who qualify for Medicaid or SSI without disqualifying them from receiving those benefits. Have a lawyer draft such a trust for you.

8 Plan ahead. To get a handle on how much money you might need over time to cover a family member's expenses, use Merrill Lynch's Special Needs Calculator at http://askmerrill.ml.com/snc/starting.asp.

9 Tap into local support. You can find contact information for local experts through the National Alliance on Mental Illness (www.nami.org, toll-free 1-800-950-6264). The national Eldercare Locator (toll-free 1-800-677-1116) can connect you with your local Area Agency on Aging office if you're lining up care for an aging relative.

10 Make sure your child's care is covered. If you die before doing advance planning for your disabled child, the courts could appoint a guardian without direction from you. Your child also may not be equipped to handle money inherited from you. The book Planning for the Future: Providing a Meaningful Life for a Child with a Disability After Your Death" (www.specialneedslegalplanning.com) contains helpful advice.

Sources: Consumer Reports Money Adviser; Kiplinger's Personal Finance magazine (www.kiplinger.com); MSN Money (http://moneycentral.msn.com).