Another complication is added if the grandchild in question has any
special medical or therapeutic needs. "In these cases, you need to
involve a lawyer who knows special needs laws as quickly as possible. A
child may become ineligible for needed care if he or she is adopted by
a grandparent; he or she may then be pushed to the bottom of a waiting
list to become re-eligible. The consequences can be devastating."
Immediate action is the key to handling these unusual situations, says
Mark LaSpisa of Vermillion Financial Advisors in South Barrington, Ill.
"As soon as you are notified that a client is considering taking in a
grandchild, you need to do an inventory and determine how this affects
their long-term goals. What happens if one of the grandparents becomes
incapacitated? What if they divorce?" The question comes from personal
experience. A couple who had been long-time clients of LaSpisa's firm
took in a grandson and not too long afterwards divorced, after 48 years
of marriage.
"I was named conservator of my grandson. Before the divorce there was a
good deal of money, but without the proper planning there would not
have been enough after the divorce," says the grandmother, who asked
not to be identified. The grandchild qualified for SSI, and his medical
bills were covered by government programs. He also was eligible for
free counseling through the town where they lived. "Taking him in
changed my whole life. My daughters were grown and gone, but now I had
a 7-year-old to care for."
When a family is in transition, a financial advisor may have to make
unpredictable adjustments. "I was awestruck that a grandparent would
take on this responsibility, but even then I did not realize the
effects on the couple and on the marriage," LaSpisa says. "If a client
is truly in crisis, there may not be time or energy to do financial
planning. Sometimes, the best service you can provide is to let the
client go inactive for a while. Keep in touch and let them know you are
there if they need you. If you are a trusted advisor, they know they
can always come back, and that is what happened with my client."
Another important decision that may have to be made is who will stay home to care for the new child in the family. In the case of clients of Michael K. King of the Genesis Group in Brentwood, Tenn., the grandfather, who was closer to retirement age, decided to retire early and become the primary caregiver, while the grandmother continued working.
In some instances, taking in a grandchild may mean postponing retirement for both grandparents, delaying moving to a smaller home, or making other financial sacrifices. Before grandparents take on the responsibility, they may have to consider whether they have the financial and emotional resources to fight a custody battle if necessary.
Grandparents also need to consider how the situation will be affected
if their income changes. "As in the case of my clients, who were not
particularly affluent, they had to decide what to do if their health
did not enable one of them to continue working and they had to make
sure they had adequate long-term care insurance because that is a
burden you do not want to throw on a teenager," King says.
The terms of any inheritance also have to be considered, because the
chances increase that the grandchild will inherit before he or she
becomes of age, and if the grandchild is being cared for by a
grandparent, there may be reasons to want to keep money out of the
hands of the parent. "You may want to set up a generation-skipping
trust for your client, or a trust that manages a portfolio for the
grandchild. Your clients also need to designate a guardian for the
child in advance," advises Robert Matheson of Matheson Financial
Services in Naples, Fla. "If something happens to them, who will raise
the child? Who makes health care decisions? If they do not make these
decisions ahead of time, some judge will make the decisions for the
child later."