Using a special needs trust to protect disabled adult children

Parents in Florida typically expect their children to outlive them. They also expect their children to be adults when they pass away. While this is the natural order of things, not all adult children are fully capable of caring for themselves physically or financially. Because of this, their parents must take special needs planning seriously to ensure adult children with disabilities are properly cared for long after they are gone.

To do this, Forbes recommends creating a special needs trust and feeding funds to it from a life insurance policy with a last-to-die clause. A trust benefits a special needs person in three main ways. The first is that they do not have the burden of managing large sums of money. This may reduce the possibility of financial abuse by guardians. Secondly, if the child ever needs to rely on government-funded financial aid in any form, the trust will not count toward their income. Finally, assets in a trust avoid the probate process.

So, how does the last-to-die life insurance policy work? Owners of the policy pay small annual sums toward a certain amount of life insurance that provides benefits after death. Rather than pay out the insurance policy after the first partner dies, the insurance company does not make payments until the second partner passes away.

CNBC notes that one of the main questions that parents struggle with is how much money to set aside for disabled children. Note that $100,000 is the minimum requirement many experts recommend for a trust. However, this money does not need to come from regular savings. Remember that parents can use the last-to-die insurance policy to fund it. Lawsuit settlements, retirement savings and even inheritances also make good funding sources.

If these adult children communicate well, then parents may consider informing them of the provisions left behind. This may help to ease some of the anxiety many special needs people feel as their parents grow older. The other siblings may sometimes feel slighted that more preparations were made for the disabled family member, but ultimately, they might be glad of the financial assistance when it becomes their turn to care for their brother or sister.

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