A catastrophic event that leads to a brain injury, spinal injury or other life-changing health condition for your child may have you wondering how you can ensure that he or she has a secure future. Ongoing medical care will be necessary and expensive. There may be assistance programs available, but you are unsure about eligibility.
Fortunately, there are many estate planning tools that allow you to plan for your child’s current and future physical and financial needs.
Special needs trust
Perhaps a judge or jury determined that your child should receive a large financial award because the negligence of someone else caused his or her condition. This money may disqualify your child for benefits such as Medicaid or Supplemental Security Income until you have used it all. However, once it is gone, your child may become impoverished.
You may want to consider transferring your child’s award to a special needs trust. The trust owns the assets, and you appoint a trustee to manage them. Your child no longer has a full bank account and may become eligible for assistance, and the trustee can provide a monthly income that meets the eligibility limits. Even after you die, your child will have that financial security.
Life insurance trust
You could also set up a trust, transfer money to it and appoint a trustee, then instruct the trustee to purchase life insurance with the money. He or she would name the trust as the beneficiary of the policy and pay the premiums from the assets you place in the trust.
When you die, the trust receives the money and then functions similarly to a special needs trust, with the trustee managing and distributing the assets according to your instructions. However, there are some facets unique to a special needs trust that may provide additional benefits.
If you do not name a guardian for your child, the court will appoint one when you die. It is very important to find the right person: someone you know will care for your child the way you do. You could appoint the trustee to also fill the guardianship role, or you could choose to separate the financial and caregiving duties between two people.
The most important thing is to ensure the fulfillment of all of your child’s needs, now and in the future.