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Whole Life, Trusts: A One-Two Punch For Special Needs Cases

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As long as parents are alive they can take care of their children with disabilities. But what happens when parents can no longer care for their children? Who will step in to take their place? What happens if siblings or other relatives can’t or don’t want to pitch in? And how do you ensure there are enough resources to pay for expensive care that, in some cases, can last decades?

Untold families are now facing these important questions. There are nearly 5 million children in America with physical, emotional and intellectual disabilities, according to the U.S. Census Bureau’s 2006 Americans with Disabilities report.

Paying for their life-long care can be financially and emotionally overwhelming. Parents of children with disabilities tell us repeatedly that not knowing how their child will be cared for after they’re gone weighs heavily on them.

Teaming up

But financial professionals with passion, training and know-how can help. By heading up an interdisciplinary team–which can include bankers, accountants, lawyers, social workers, doctors and other financial professionals who specialize in working with families with special needs–a special care planner can help families identify, anticipate and address problems that parents alone cannot begin to tackle.

One of the challenges of developing such a life care plan is ensuring there will be financial resources to care for children with special needs for the rest of their lives, even after their parents die. Among the strategies that work well is combining a properly drafted supplemental special needs trust (SSNT) with permanent life insurance, such as whole life insurance. An SSNT and whole life insurance are a powerful one-two combination that can help ensure there will be financial resources available to pay for a loved one’s care over the long term.

For some families, the combination has answered their long-nagging questions and soothed their long-standing fears. By creating a trust and funding it with life insurance, parents can address many concerns at the same time. And by establishing a guardianship, they know who will take care of their child and how that care will be paid for.

The value of whole life

While there are many ways to fund trust accounts, permanent life insurance, particularly whole life insurance, is very effective. As long as parents pay the premiums, the policy will be there to help fund their child’s care no matter what happens to them. Whole life is thus a solid foundation for a permanent plan.

Whole life insurance has other attributes that can make it ideal for families that are developing long-range plans for members with disabilities. Whole life policies have premiums that never rise; and the policies build up cash value, so parents or guardians can borrow the cash value in an emergency or, for example, to purchase a needed piece of equipment or specialized therapies.

Creating an SSNT and funding it with life insurance are only two parts of a comprehensive life care plan. Among the many actions families need to take are:

o Finding competent, sensitive attorneys, financial services professionals, social workers, bankers, and other experts;

o Estate planning;

o Identifying a guardian for the child;

o Ensuring the child does not lose government benefits. (Gifts or inheritances, if not handled correctly, can cause the government to suspend the child’s benefits.)

o Drafting a letter of intent that records everything a caregiver should know about the child, including hereditary information, medical history, religious practices, favorite games, foods and activities;

o Setting up a health insurance plan that benefits the child;

o Determining whether the child needs a guardian on becoming an adult; and

o Establishing housing when the child becomes an adult.

A gift of love

Parents of a child with special needs face enormously difficult issues. But planning for the time when the child must go on without them can be one of the greatest gifts of love they will ever bestow.

William F. Dougherty, J.D., is assistant vice president, market development, U.S. Insurance Group, at Massachusetts Mutual Life Insurance Co. (MassMutual), Springfield, Ma. He can be emailed at [email protected].