Special Needs Planning

Life insurance and financial professionals often seek to differentiate themselves from their competitors. Some might work with young professionals. Others help older, wealthy clients manage estate tax issues. Still others may find a niche coaching business owners with regard to buy-sell planning or employee benefits. What about helping those who have a family member with special needs?

Most cases will start with helping the parents of a child with special needs. However, other family members—including siblings and grandparents—can end up in the role of financial caretaker for a person with special needs. With the advances in medical care, many special-needs family members can live for a long time, making financial planning especially important.

Types of Issues Common to Special-Needs Families
Families who are taking care of members with special needs are dealing with financial concerns that are of a different shape than more traditional clients.


Retirement planning for most clients involves making sure the individual, or both spouses if married, have enough savings to produce the income needed to maintain lifestyle in retirement.
A special-needs child may not be able to produce income at any point during his or her lifetime to pay for the child’s own support. Usually the child’s parents must make plans to provide for that support for as long as the child lives.

In the special-needs arena the life expectancy of the family member who needs care can be an important factor in making sensible financial plans. In some cases, even though a child is impaired, the family expects the child to have a normal life expectancy. For many, in addition to normal support needs, supplemental medical or therapy expenses can last a lifetime.

When working with parents who have a child with special needs, the lump sum needed to support a comfortable retirement can easily be more than twice that of a comparable married couple without a special-needs child. Likewise, extra life insurance coverage is needed to protect against the shortage of funds due to the possibility of a preretirement death.


Family who want to make assets available to special-needs beneficiaries should generally consider drafting a special-needs trust. A special-needs trust or supplemental-needs trust (SNT) is a specialized legal document designed to provide benefits to the beneficiary without adding to the person’s countable net worth or countable income.

An SNT can be created to come into existence immediately, or it can spring into existence in the future. For example, a special-needs person’s parents might create an SNT inside of the last will or revocable trust. However, families are encouraged to prepare a stand-alone special-needs trust so they can have the peace of mind that the trust is created and in existence during their lifetime.
An SNT enables a person with a physical or mental disability to have, held in trust, an unlimited amount of assets. If the SNT is drafted and administered properly, those assets do not count against SSI or Medicaid eligibility.

An SNT gives the trustee the ability to provide for supplemental and extra care over and above that which the  government provides. The SNT must not require the trustee to make distributions for the special-needs beneficiary, as such a requirement would cause the trust assets to count as available resources.

To be effective, SNTs must be irrevocable once they are created and funded. An attorney drafting the trust will coach the family about how the trust should be administered and will include directions in the trust for its termination and ultimate distribution to family members or other beneficiaries.


  • As with any other trust, making the right selection for the trustee can mean the difference between adequate financial support for the beneficiary and failure to meet the planning objectives. Consider hiring a professional trustee to complement the caregiving skills of a family guardian.
  • SNTs can be created to exist right now or to spring into existence at someone’s death (usually the caregiving parent). In many cases, choosing the testamentary trust approach will offer the most flexibility to the family.
  • There can be tension between the choices of naming an individual the beneficiary of a qualified account asset (such as an IRA) or naming a trust beneficiary. Issues such as taxation and stretch options may be less important to those who have a special-needs beneficiary than the proper care of the loved one.
  • If a special-needs beneficiary gets money directly from an inheritance or by beneficiary designation, it may revoke eligibility for needs-based benefits, and getting eligibility back may be difficulty. While undoing a bequest though post-death estate planning by using a qualified disclaimer is possible in many instances, that technique is probably not effective to restore a beneficiary’s access to needs-based benefits.