Life insurance coverage when you have a special needs child
As parents, protecting our kids is our No. 1 responsibility. It's tough for just about any parent to consider what might happen to their kids if something happen to them. My sister and that i discuss mtss is a lot. She's an amazing mom to my fantastic nephew, that has special needs. Whenever my sister and that i take a seat to speak about estate planning or any other financial decisions regarding her son, it isn't a simple discussion. She faces so many financial challenges and questions.
For her, life insurance takes on a whole new degree of importance. Wanting to protect her son means not only having him listed on her insurance policy like a beneficiary, and placing a will in position that guides his care.
Of course, as a financial planner, I understand that each family is in their own unique situation. As a parent, I also know that all of our kids have different needs – financial and otherwise. That being said, a great initial step to take your estate planning process would be to organize a life insurance strategy that matches within your budget and meets all your child's needs.
Estimate future costs
Your initial step when getting a life insurance coverage that fits your family's needs is to estimate any future costs for your kids. Again, because every family's situation differs, and every child will have a different set of future needs, this might take a moment. You should start by estimating what their price of care will be – from the moment your policy takes over, throughout your child's life. This might be overwhelming, and talking to your present pediatrician or care specialist will help you get a handle on what future care costs your little one might incur.
Other expenses you may supplment your cost estimate are:
- Food and basic needs or expenses
- An “emergency savings” for your child to access if needed
- Medical expenses including prescriptions, specialists they might need to see, primary health care providers and insurance premiums
- A caregiver (both now, and if they'll need a full or part-time caregiver as an adult)
- Transportation costs
- Life expenses (for example weddings, cost of housing, the cost of a service animal as well as their care)
- End-of-life expenses for you personally – and possibly for them
- The amount required to pay back all of your debt
- Adaptive equipment
- A legal advocate
Consider a unique needs trust
The last thing you want would be to have your assets obsessed with probate as members of the family contest wills, or try to divide your wealth after you perish. You need to make sure that your child has access to the money they need to cover care and all of their other living expenses right away. A unique needs trust will help get money straight to your son or daughter once you perish while the rest of your assets are divided according to your estate plan. It helps to go forward through any delay, and can still permit them to be eligible for a government benefits that they're going to receive like a disabled minor (or adult).
Striking the total amount between ensuring your son or daughter is looked after, as well as ensuring their inheritance doesn't disqualify them from any additional benefits they may receive, is key.
A trust doesn't only need to be the beneficiary for the life insurance. It is also an area in which you make regular contributions for your special needs child – just like a kind of savings account that protects them in the event of your death. You can even tell family members about the trust, then grandparents, aunts or uncles, and other family members can contribute as well if they wish to include your child within their inheritance planning.
Think about long-term care
Your main concern at this time might be handling your child when they are still young. The amount of care that any kid needs will stress any parent out when trying to construct an estate plan. Attempting to estimate the concern your son or daughter might need whenever you perish can be much more overwhelming. Even though it's easy to get caught up in the emotional and logistical concerns of planning your child's care, you need to go forward and think about how you'll get ready for their care as an adult, as well.
It can be hard to understand exactly what degree of care they'll need, and so i tend to think it is best to air along the side of caution. You are able to plan for the long-term by using life insurance coverage in a few different ways. Having enough coverage is your first step, but next, you can try:
- Laddering insurance policies will help you have enough coverage to satisfy their demands as they (and you) age
- Look into an insurance rider specifically for special needs children that provides extra coverage
- Finding the best term life insurance policy to cover your adult children it doesn't matter how long you live
Most parents slowly reduce their amount of insurance coverage as their kids develop, leave the home and start lives that belongs to them. Depending on your child's specific needs, this might or may not be the best strategy for you.
Your adult child may require additional coverage that will require a consistently hefty life insurance coverage – even after your initial term life insurance ends. Estimating your costs ahead of time, even while your son or daughter grows into an adult, is really important since it helps you decide exactly the quantity of coverage you need, and what kind of life insurance coverage you should obtain.
Consider life insurance for the child
It's simple to get caught up planning for the kind of coverage you will need to safeguard your son or daughter, however, you should also consider which kind of coverage your child needs – if any.
Life insurance for the child will also help to safeguard you his or her parent. Being a parent of a special needs child is often a financial challenge. Expenses could be high, there can be medical debts to consider, and sometimes a parent may quit their job to look after the youngster full-time which could impact their future retirement funds or Social Security benefits.
If something would occur to your child, it may be challenging to recoup those expenses, and parents can get stuck in a lot of debt and without greatly savings to deal with themselves within the wake of losing the youngster. The very last thing you want while navigating unimaginable grief is to also struggle with financial hardship. Life insurance coverage for the child can help to balance this risk – even when it's one you won't ever be thinking about like a possibility.
Look at all your options
Remember that traditional life insurance for you personally or for your special needs child needn't be your main option. You may also look at a second-to-die policy. This type of policy covers two people – and it doesn't pay a death benefit until both of these individuals pass away. This can help to offer coverage for the child and keep payments low. However, this kind of policy doesn't protect your lover when they outlive you, which can be tough if they're shouldering the costs and challenges of raising your son or daughter alone after you perish.
As far as insurance goes, most of your options are:
- Term life insurance
- Life insurance for your child
- Second-to-die policies
- Special needs trust
- Additional riders on your insurance policy if available*
Beyond that, it may be a good idea to take a seat and also have a conversation together with your physician, a social worker, an estate planning attorney, an insurance agent, and a financial planner which specializes in organizing financial to safeguard children with special needs. These professionals can assist you to come up with a plan to help protect you, your lover, your loved ones as well as your child both now but for the remainder of their lives.