Nearly 54 million Americans cope with special needs and the rising associated expenses, according to the National Organization on Disability. And according to the Caregiver Action Network, in the U.S., 14 percent of caregivers care for a special needs child; 16.8 million are caring for special needs children under 18 years old and 55 percent of these caregivers are caring for their own children.
If you have a child with special needs or you care for a family member with special needs, then you know how much time and money it takes to provide them with everything they need. Simply planning their day-to-day requires some effort, but don’t forget about their long-term planning needs as well.
You hope to be around as long as possible to provide for them, but what happens if you die prematurely? What happens when you’re no longer there? Financial stability can be provided through a Special Needs Trust, which can be funded by life insurance.
The Benefits of a Special Needs Trust
A special needs trust has many functions, but two really stand out:
- A special needs trust can preserve the beneficiary’s eligibility for government benefits such as Social Security, Medicaid, and housing, among other programs.
- A special needs trustee can manage the funds on behalf of your loved one.
Special needs trusts can be complicated so it is best to work with an attorney who has experience in special needs planning. A professional can ensure the trust is appropriately written. If prepared properly, a special needs trust can accomplish a variety of goals, such as:
- It can allow you to leave property and resources for the benefit of a family member with a disability without losing important public assistance.
- It can prevent siblings from being over-burdened with caring for a sibling with disabilities.
- It can help the grantor to equitably distribute the estate.
- When properly funded and managed, it can help ensure there is enough money to sustain an individual with a disability over time.
A special needs trust can help provide for many aspects of life. To protect the beneficiary’s government benefits; however, the trust should not be set up to provide directly for basic shelter, food, or payment of cash to the special needs family member.
What it can help pay for includes, but is not limited to:
One of the best ways to fund a special needs trust is with life insurance.
The Trustee of a Special Needs Trust
When preparing a special needs trust, you need to name someone who will be in charge of managing the assets in the trust. This person is called a Trustee. The trustee needs to be chosen carefully since this person will have sole discretion in making distributions for the benefit of the special needs individual.
An ideal trustee would have the following qualities:
- Similar values to yours
- Financially savvy
- A strong advocate for your beneficiary
The trustee has a lot of responsibility, so it’s important to note that it does not have to fall on one person. The trustee can be a combination of an individual and a corporate trustee.
Funding a Special Needs Trust
Sure, a special needs trust sounds great, but where is this money going to come from? Nursing services, transportation, therapy, service animals, etc… all of these things cost money.
Well, you (and any family members or friends who wish to do so) can fund the trust with personal assets, such as savings or Certificate of Deposits (CDs). You (and others) can also name the trust the beneficiary of a will. One of the best ways to fund a special needs trust though is with life insurance.
The benefits of using life insurance to fund a trust:
- Cost effective – provides a large sum of money for comparatively low premium payments
- Typically protected from creditors
- Death benefit is income and estate tax free if properly structured
- Can easily distribute proceeds between care for your special needs loved one and any other children or family members you wish to financially protect
- Brings peace of mind that your loved one will be cared for even after your death
Your Next Step
No one knows what the future will bring. If you haven’t planned for the future needs of your loved ones, no time is better than the present. If you already have life insurance, but haven’t set up a special needs trust, it’s not too late. You have the option to update your life insurance beneficiaries to include the trust.
Remember, if possible, have an estate planning attorney who is well versed in the world of special needs documents help you. If you do not yet have life insurance, you can get a term life insurance quote free and instantly. Contact us if you have any questions, our friendly agents will be more than happy to guide you.
Image credit to: Nathan Anderson
About the writer
Marketing Content and Social Media Manager
Natasha is a content manager and editor for Quotacy. She has worked in the life insurance industry since 2010, and making life insurance easier to understand with her writing since 2014. When not at work, you can find her throwing a tennis ball for her pit bull mix, Emmett, or curled up on her couch watching Netflix. If it’s football season, the Packers game will be on. Connect with her on LinkedIn.