Life insurance useful in special needs planning

Those who have special needs children know that caring for such a child can be a challenge. The range of disabilities varies greatly, and so do the specific needs each of these children. When it comes to planning for the future of these children, there are additional matters to think about, including how to provide financial assistance for a special needs child without jeopardizing their eligibility for government benefits.

One of the major benefits of a special needs trust is that it sets aside money for the benefit of a special needs child, but it does not harm their chance of receiving needed government aid, since the trust money is not counted as part of the child's assets.

Usually a family member will serve as the trustee, taking responsibility for distributing money for their care. Each trust should be specifically designed for the special needs child it is intended to serve.

One common funding technique is to place a life insurance policy in a trust and make a special needs child the beneficiary. Life insurance companies are increasingly working with people who are using this approach. Whole life insurance policies will help finance the child's lifetime needs as well as cash value which can be borrowed in emergencies.

Parents with special needs children should also consider taking out additional disability insurance, as well as waivers of premium rider, which pays the premium in the event of disability.

One of the most important things about special needs planning is to avoid procrastination. Doing so will put your mind at ease and allow you to ensure a better future for yourself and your special needs child.

Source: Fox Business, "Why Your Life Insurance is Key to Financial Planning," Barbara Marquand, March 19, 2012.

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