Parents whose children include a special needs child have a unique estate
planning challenge. They are often torn between wanting to leave an equal
legacy to all their children and knowing that their special needs child
will probably need more financial assistance than their other children.
One solution to this challenge is to set up a special needs trust for
their special needs child (a third party special needs trust) and fund
it with life insurance.
It is important that the special needs child receive an inheritance from
his or her parents in a special needs trust rather than as an outright
distribution. An inheritance received in a special needs trust will not
interfere with the government benefits that the special needs child depends
upon but an inheritance received outright may very well cause the child
to no longer be eligible for government benefits.
Once the parents set up the special needs trust as part of their estate
planning, they can look to life insurance as a source of money to fund
the special needs trust upon their death. This way, the special needs
child can receive the extra money they typically need over their lifetime
and the other children can still receive an inheritance from their parents.
So, if you have a special needs child, a discussion with your estate planning
attorney, as well as your insurance agent about the various ways life
insurance can be used to fund a special needs trust for your child may
be the answer for your unique estate planning challenge.