Managing your family’s financial needs requires daily, ongoing oversight and planning if you want to uphold lifelong wellness. And for families who have loved ones with disabilities, the planning needs become even more intricate. You must look out for your own ability to support your family while helping to ensure financial independence for your loved ones who need ongoing care.
Many families who have members with a disability address their financial goals by taking out a Special Needs Trust (SNT).
How a Special Needs Trust Can Help Families
When a family takes out an SNT for a loved one with disabilities, you enter into a legally binding fiduciary relationship. This trust enables your loved ones with disabilities to receive income and save money that will cover a portion of their financial needs — without jeopardizing their ability to receive disability benefits through Social Security, Supplemental Security Income, Medicare, or Medicaid.
With an SNT, parents, guardians, and other third parties can fund the trust without being subject to Medicaid’s repayment rules[i]. Families can elect to fund different trust structures, and your unique financial situation and needs will drive which trust is right for you.
Why Fund an SNT With Life Insurance
Taking out a Special Needs Trust for your loved ones with disabilities can help you create a financial strategy that prepares you all for the road ahead.
Once you open an SNT, you’ll need to assign a trustee to manage it and create a plan for funding the trust. Often, families choose not to fund the trust with their retirement and business assets, since these may not be suitable assets for a loved one with disabilities2. In these instances, life insurance can help create the financial support you need.
Funding your SNT with life insurance can do two things for you: 1) create a financial backup for your family member should anything happen to you and 2) provide you with access to assets that you can use to fund your loved one’s savings.
Safeguarding your loved ones with life insurance also helps your other family members without disabilities. If something happens to you and you’re no longer able to care for them, you’ll have the protection of your life insurance to support all family members.
In addition, by funding with life insurance, you can not only provide funds less expensively than with cash or savings — but you will also create guaranteed funding into the SNT once you pass away[ii]. This guarantee does not exist with regular cash or savings. Different life insurance policies have different funding abilities, so you’ll need to make sure that you have the coverage you need to support your funding goals.
Caring for loved ones with disabilities certainly can bring challenges, but you have options to help you make the most of your opportunities
To explore if funding a Special Needs Trust with life insurance is an option for your family, contact us at (518) 581-1642. We’re happy to help you find the financial strategy that helps you and your loved ones live your best lives.