A special needs trust is a way for parents to take care of a child who may not ever be fully independent. A well-funded trust can provide years of economic support. The beneficiary with special needs can also gain social support from the trustee overseeing their resources.
Parents attempting to fund a special needs trust often find themselves in a difficult situation. Their child may have more costly regular support needs because of their medical challenges. The household budget could be relatively tight.
How can parents establish a well-funded trust in scenarios where they don’t have enough capital to set aside to fund the trust immediately?
Life insurance can help close the gap
There are certain types of assets that parents may want to use to fund a special needs trust to ensure the comfort of the beneficiary regardless of what may happen in the future. Families often move the ownership of their primary residence to a special needs trust to ensure that the beneficiary can remain in the same location indefinitely.
Setting aside enough liquid capital to provide support for medical expenses and other basic needs can be a challenge. Parents may want to review and enhance their life insurance. Life insurance proceeds can fund a trust after a parent dies.
By filing paperwork that names the trust as the beneficiary of the policy, parents can supplement the resources they currently have available with the insurance that becomes available if they die prematurely. The child with special needs receives ongoing support after a tragedy without the family struggling to include the trust in the household budget.
Thinking carefully about how to structure and fund a special needs trust can make a major difference for concerned parents who want to support a child with special needs. Life insurance can play an important role in properly funding a special needs trust.
