Special Needs Trust

I suppose the question assumes that you are financially secure enough to see that the guaranteed income continues past you and your spouse's lifespan through your YA's mid to old age, in which case, there are certainly lawyers who can, as is done for continuing care of more severely disabled adult dependents, establish a third-party special needs trust account that will continue through your YA's lifespan. I think the hardest part of the question is whether or not your YA will be able to function independently in terms of securing and paying for the services you mention, (healthcare, cell phone, insurance, etc) above and beyond securing and maintaining employment. I'm sorry that I have no advice to give, but we have a disabled niece who has a similar trust established but will need supervised care. I hope there are others here that can offer assistance. Good luck to you all.

If you're able to do that, I think it's a kind idea - but tie it to a set of requirements that show you have solid expectations and respect for your child. The income is theirs IF they maintain at least a 32 hour workweek or whatever. Or provide incentives for getting and keeping decent jobs and making good choices, not slacking off etc. Just make them part of the solution, bc otherwise it would be easy to create dependency where there might not need to be any, and you send a strong message that suggests you don't think they can do it on their own. If there are years that they actually can live wholly independently, say you'll bank that income for them, towards a home purchase or a rainy day, etc.

I can speak to being on the receiving end of such an arrangement. In my mid-20s, I started a 7-year PhD program that paid extremely little. My mother decided to give me $400 per month while I was in grad school, and it honestly was a godsend - this was in 2004, so obviously this amount would not go as far these days. While finances were still tight, this money meant that I was able to afford a safe, quiet place to live, and I didn't have to worry about being able to afford groceries. I will always be grateful to my mom for this, and I absolutely plan to do something similar for my own kids, if I can afford it, and if they need it.

This sounds like a really good idea. Many of my friends' children, and my own, have needed help of various sorts through the twenties, and given that your child has a LD it may take them longer. One note of hope -- my niece who is now 30 is finally pretty much independent (getting help structuring her life from friends rather than her parents.) You know your child, and if you  think this kind of help will keep them as independent as possible it is a great idea. Also, things are much harder for young people than they used to be in the job world -- expectations are much higher for professional jobs.

Honestly, if you can afford it, this sounds wonderful. I have a neurodivergent young adult kid and have had to realize that they need different support than my neurotypical kid. For example, living at home a lot longer than most of their peers. If it doesn’t work, you can always change things. If your kid is disabled there are accounts, called an ABLE account that may have some tax advantages, especially if they end up on SSI and working only part-time. I have not used these accounts for my kid, but heard from other parents that they are useful. You sound like an awesome parent- facilitating your kid’s independence and well-being in a loving way!

This is indeed a tricky situation. I am in a similar situation with one of my YA kids (love that term!), although mine did not attend college. They have been working in the same full-time, low-wage job for two years, although they get no benefits.

My first suggestion to you is to consult an attorney and tax expert. I discussed these issues with my attorney and tax advisor/preparer when I set up an estate plan. There are legal and tax implications to your decisions.

For now, my YA kid lives a hand-to-mouth existence (as I did at their age). They support themselves and receive a very small monthly stipend from their dad. I have them on my mobile phone plan. We occasionally go grocery shopping together, and I pay for their groceries. I tend to give things like a computer or airline ticket as birthday or holiday gifts. Their dad and I pay for health insurance and expenses. They are beginning to see how difficult it is to live this way which I hope will encourage them to either find a job with benefits or enroll in school or a training program to get a higher paying job with benefits. Their dad and I will jointly support them while they are in school or a training program. Still, they are not likely to lead to a stable, comfortable, middle-class life anytime soon. I'll make decisions as to increased support as we go along.

It's worth it to say: they feel proud of their ability to support themselves now, even if they are not living the lifestyle I would wish for them. They live in a safe neighborhood in an older apartment complex and have little disposable income. They do not want a monthly stipend, and are working toward not taking one from their dad. They appreciate one-off support for things like furnishing an apartment or purchasing a car or adopting a pet. But, they take pride in earning the money for the day to day cost of an apartment, car, and pet.

I have addressed long-term support for HEMS (health, education, maintenance, and support) as defined by the IRS in my estate plan, so they will have support upon my death (whether that be supplemental or full support, if needed). I don't have a special needs trust, that is not warranted in our situation. Rather, I have named a fiduciary to manage the estate and oversee their support over their lifetime (assuming the funds last). Two family friends are named as advisors to the trust so there is a check and balance to ensure my wishes are carried out.

It sounds like you are considering something quite different. But, I thought I'd share what's working for us. Each family and situation is unique. As thoughtful as you are going into this, you'll find what works for you.

I have not done this but considered doing it (then my YA Kid's circumstances changed!). I think it is a great idea.

You don't mention your finances. I encourage you to meet with a financial planner and make sure you have enough for your retirement before committing to this. It might be good to start with a smaller amount annually to your kid, both bc you can always increase it later and bc 25 year olds normally have lower income (and lower expenses) than 45 year olds.

You also don't mention your kid's executive functioning. Getting the money monthly may work well, and it may not. Paying specific expenses (eg rent) directly ensures they will get paid Of course if you go this route, you will need a trustee who can continue this after you pass away (you'll need that for a monthly lump sum as well, but much less work to do that!). Certainly you can try it monthly, but I would explain that it is an experiment that you want to try for 3 mos or 6 mos or whatever. I think it is fine to say that you committed to helping them financially - that part doesn't have to be presented as an experiment - but that you want to figure out the best way to do it, with input from them and also by trying out different options.

Finally, depending on the amount you plan to give annually, there may be tax implications, so be sure to talk to your tax professional...

We may be facing that too. We're a few years behind you so we'll see. I'm also the ttee a special needs trusts for a sibling who sounds somewhat like this. I can't speak to if it demotivates or helps. With my sibling I do think it demotivated them but they wouldn't have made much of their life anyway. Despite being very smart, they are unable to manage their life at all so they probably would be living on the street without it. But my understanding is that special needs trust are for those who receive government benefits that they would lose if they received the money outright - like SSI or medicaid. So a special needs trust may not be the right fit but there are other trusts. I have a friend who is a trustee for their sibling, who is like mine except is not receiving any benefits so they had to make a different type of trust for him, I can't remember what it's called but it basically it means he doesn't have direct access to inheritance from the parents. Both the special needs and these types are written up as sub-trusts in your trust, it will outline what his money can be spent on - rent, medical costs, food etc and that's it. Then after your death, they become stand alone after your death (you have an attorney draft a trust certification so that you now have a stand alone document that you'll need to set up a bank account etc).

2 things - outside administrators (usually attorneys) are costly and will eat into the funds. And attorneys are full of misinformation - because each person has different set of benefits with different requirements and even the attorney who writes up your trust/subtrust doesn't not understand how these interface with benefits.

Anyway I'd suggest you look into the "Truelink" prepaid credit card. https://www.truelinkfinancial.com/families We use this and it has been a godsend. You control it, you can load it as much as you want and set limits on how much and where he can use it. He has the card, feels independent but you control it and view all activity. Perhaps you can give him x amount each year as part of the gift amount one can do, and get a routine going. Then if you ever need someone to take it over, it will be smooth running (the hard part is setting everything up). Then also do a sub-trust in your trust that outlines the limitations. The funds in this trust can be held in a bank and also mutual fund (for growth). Set up auto-funding to Truelink. If it is simple and already running, you can probably have a family friend be the ttee (or find 2, one as a back up watch-dog) and it should only take an hour a month (but you still have to pay them because it is all hassle). Many people handle their parents' trusts so you'll know a few people who may take it on. Make sure they are totally trustworthy and also that they provide monthly statements of all assets. I think annually is what is required, but I feel annually just leads to misuse.

Re thoughts on this. As you have stated, you have already tried everything else. These funds will provide security and it is your money to do as you wish, and for most parents that is help their child. If they are constructive, hopefully it may even lead to more independence. If they are destructive, maybe turning to drugs then keep a tight rein on cash and how much you give. I really hope it works out for you. I'm already impressed about college! Wish you the best.

"Guaranteed basic income from parents" is a pretty funny way of recharacterizing a "trust fund."  These are extremely common for those families with the wealth to create and secure a trust fund for their children.  The question about whether a trust fund hurts or helps a kid is pretty hotly debated (wealth poisoning, dependency, incentives, entitlement, etc. etc.) and many trust funds dissolve when kids are through college and they are presumed to be responsible enough to manage the funds for themselves.  Not all of them are though and a lot of trusts are designed to be modified so that if a parent doesn't think their kid could manage getting a big payout that the trust continues in a restricted capacity, with trustee oversight forever. 

So, lots of wealthy kids out there who have no learning disabilities whatsoever are sitting around receiving basic incomes from their parents for many years after they get out of college.   I wouldn't fret.   If you can afford it, it's a big gift that will protect your kid from the types of cascading catastrophes and debt traps that those who have no other choice get ensnared into every day in our country. 

If your kid is receiving government benefits as a result of their disability this is something to get professional advice around because the income you provide to them may impact their ability to receive government assistance from income qualifying programs.

Just to add on to the last poster's very useful comment, the expert in our area on Special Needs Trusts (SNT) is https://www.urblaw.com/ - Urbatsch Law Firm. Kevin Urbatsch wrote two books on SNT that standards out there - one on SNT and the other on administering a SNT. These are very useful. But again it would all depend on WHAT benefits a child gets, each has their own set of rules. Some are very restrictive (ssi etc) and others less so (ssdi) these are just 2 examples. Even then you must always make sure any info you receive is for the specific benefit your kid gets, not general info. 

Most attorneys will include those who will add a SNT within a parent's trust they have no real understanding of how it works with the benefits and often provide all sorts of misinformation, just because each case is so individualized.

But it's not clear that a SNT is appropriate for your kid. Maybe a different type of trust.