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Life insurance trusts can be critical for special needs children

Families with special needs children are aware of the extra care and consideration that their children require. When the time comes to consider estate planning, families need to focus on structuring a plan that will ensure that the special needs child will be cared for throughout his or her life. Life insurance trusts are among the best options for Philadelphia families who are concerned about continuing care needs.

Families can purchase life insurance with a value that will ensure that a special needs child is properly cared for after the loss of both parents. The trust is then structured so that the trust itself owns the life insurance policy. That effectively removes the life insurance from the parent's taxable estate. Once the person named on the policy dies, the trust is also the beneficiary of the life insurance proceeds.

From that point forward, the trust administrator will manage the trust and oversee the disbursement of funds to the named beneficiaries. The trust is managed based upon the guidelines provided by the original policyholder, which allows families to have control over how the funds are used. In the case of a special needs child, the trust can pay for the cost of residential care or in-home supplemental care, depending on the unique needs of the child.

Life insurance trusts are subject to strict rules and guidelines. In order for these trusts to be effective, they must be created and managed in a certain way. For any Philadelphia family with a special needs child, the choice to place the trust under professional administration can bring about significant peace of mind.

Source: The National Law Review, "Special Needs Children??? How Divorce Can Impact Your Estate Plan", Catherine F. Schott Murray, June 9, 2016

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