Financially Supporting Your Special Needs Child in The Present and The Future

11th January 2018
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The lucky ones have a simple life with simpler needs. They usually go for regular life insurance policies with daily needs including financial protection till they manage to pay off the mortgage and send their kids to college. In situations like these, when people choose second to die insurance policies, it is easier to determine the term period, death benefit and other nuances. However, when people have a special needs child at home, the matters become a little more complicated. In certain situations, families have to ensure lifelong financial care for their special needs child. The responsibility extends to their next generation, and so does the benefit of the policy.

How do you know which policy is right for your child?

Finding the correct policy that will cover multiple generations and pay for the upbringing, livelihood, and wellbeing of a special child can be very challenging even in the US. These policies need utmost care during drawing since they have to provide complete financial assistance in the years to come for the caregiver or the guardian of the individual in question. You need strong plans that can protect and uphold your child’s government benefits and a certain standard of living in your absence. When the parent has a disposable income, they can convert the coverage off to a life insurance policy. For the parents of a special needs child, who are looking to safeguard his or her future days, a second to die policy or a survivorship policy is indeed one of the best ideas.

How to secure the trust with an insurance policy?

A special needs trust is a marvelous way to secure the future of loved ones with special needs. Going with any form of permanent insurance policy to pay for the trust is a smart decision indeed. For couples, the insurance usually amounts to survivorship insurance that has a lower premium but a higher payout. It a second to die policy usually pays out upon the death of the second surviving holder only. It ensures that there is money for your child, no matter what circumstances arise during or after your death. The guardian can use these funds later for rent, education and regular livelihood, while preserving their right for Medicare and Social Security Disability Insurance benefits from the state.

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Which features define a good survivorship policy?

When you are looking towards a special needs trust, you need to consider a few factors before you choose an insurance policy that can feed money to the trust. Here are the three features every policy you shortlist must contain –

  • A plan that your child will NOT outlive
  • The price of premiums must become debilitating as they age
  • In the unfortunate event of the beneficiary’s death, the policy should be cancellable without penalties

That means you will automatically find most term insurance policies out of your way. Now, your task is to find a reliable insurance company that provides rewarding second to die policies. Do remember, to eliminate non-guaranteed universal policies as well since they offer cash accrual and borrowing features. These additives can inflate the price of the premiums, and you do not want high rates coming in the way of the trust.

What should you know before you buy your survivorship policy?

Here are a few advantages of any second to die insurance policy you must know before you go on to buy two separate policies for you and your significant other.

  • They provide a much lower cost of coverage for two individuals.
  • They allow room for flexible and liberal underwriting since the risk involves two individuals.
  • They can defer payout and tax payments until the death of the last survivor.

When you want to set up a trust and fuel it with the second to die policy, you need to mention the trust as the primary beneficiary. If you have another child who is capable and willing to take care of the one with special needs, it is acceptable for them to be the contingent. Having a backup beneficiary is more common than you think in case of a special needs trust.

Wrapping things up for you

Second to die policies are the best ways to fund such trusts simply because most families have their 401(k)s and IRAs immobilized by retirement funds. Many finance experts think that including IRA benefits in the special needs trust is an efficient and rewarding decision. Just like survivorship life insurances, these do not have terms, and they are perfect for funding any special needs trust within the US.

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