Financial planning for children with special needs
Long-term financial planning might seem out of reach when you're overwhelmed with coordinating day-to-day services for a child with special needs.
But it's one task you can't risk putting off.
The good news: Plenty of support is available, and with the right help you can lay a secure foundation for your child's future.
Here are four insurance tips:
1. Assemble a team of savvy advisers
As a parent of a child with special needs, financial planning is especially complex because you have to think beyond your lifetime and set up the appropriate legal structures, such as guardianship and trusts.
You need more than standard financial and legal advisers; you need experts who specialize in working with families who have loved ones with special needs. The team should include an attorney, accountant and life insurance agent.
Most life insurance agents aren't familiar with the unique needs of planning for a child with special needs. Choose a professional who has completed special training and has a passion for working with families like yours.
Some large life insurance companies have units dedicated to serving families with needs, such as MetLife's Center for Special Needs Planning and MassMutual Financial Group's SpecialCare program. MassMutual agents who complete intensive coursework at The American College in Bryn Mawr, Pa., can earn the Chartered Special Needs Consultant designation.
The Academy of Special Needs Planners provides an online tool for finding special needs attorneys. A good special needs attorney in your area might also be able to refer you to other professionals, such as accountants.
2. Understand the legal restrictions for government aid for your child
Work with an attorney to set up a special needs trust if you think your child will rely on government assistance. Federal law stipulates that anyone who inherits or is given more than $2,000 is disqualified from government benefits, such as Supplementary Security Income and Medicaid. The trust holds assets for your child, and distributes money for the child's needs.
Make sure any life insurance you buy to support your child names the trust as the beneficiary to protect eligibility for government benefits.
3. Choose the right kind of life insurance to benefit your child
Work with a life insurance agent to plan how much insurance to buy, and to help you choose the most appropriate permanent, cash-value policy, such as a whole life policy.
Consider purchasing a waiver of premium rider, which keeps the policy in force if you become disabled and can't pay the premium. Also consider a guaranteed insurability rider, which lets you buy more insurance later without providing health information.
4. Make sure your other insurance needs are covered
Protect your family with enough long-term care insurance and disability insurance for you and your spouse in case either of you gets sick or hurt. The added layer of protection will help you remain financially stable even under difficult circumstances, so you can continue to provide for your child.
Financial planning isn't a one-shot deal. Start today, and continue to revise and update the plan as life evolves.
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