When a client has a disabled or mentally challenged child, financial advisors need to take care when planning the child’s future, a MetLife executive points out.[@@]

Under federal rules, a special-needs child who inherits an estate worth more than $2,000 would lose access to government assistance such as Social Security or Medicaid. They would even have to pay back any government benefits they had received up to that point.

Advisors can better serve these clients by getting to know local attorneys experienced in setting up special-needs trusts, points out Nadine Vogel, a MetLife Inc. vice president and founder of its Division of Estate Planning for Special Kids, known as MetDESK.

These financial instruments, also known as supplemental trusts, enable parents to provide for a special-needs child after the parents are gone without risking the child’s qualifications for government-funded medical care and other benefits.

Financial planners and advisors can best help by showing parents affordable ways to finance the trusts, Vogel says.

Life insurance with a second-to-die provision and secondary guarantees is a popular funding choice. Such contracts can be set up with a policy-split option that would convert the policy to two first-to-die policies covering each parent, should the special-needs child predecease them, she explains.

Long term care insurance may be another consideration, she notes.

“What if the child were living with the parent when the parent became disabled?” she asks.

An LTC insurance policy with home care benefits would allow such a parent to continue to live at home with the handicapped child.

Parents of special-needs kids usually need sound financial advice about their children’s future, notes Vogel, pointing to a recent MetLife survey that found 60% of parents with special-needs kids say their children will always be dependent. Yet 68% of these parents had not written a will, and 29% had done nothing at all to plan for their children’s financial future.