Why Naming Your Special Needs Child As Your Life Insurance Beneficiary Is A Bad Idea
You want your special needs child to have all the help possible in the event of your death. Naming him or her as your life insurance beneficiary seems like a good idea at the time, but it could be one of the worst things for them. Here's why you want to avoid naming your special needs child as your life insurance beneficiary.
No Access to Government Benefits
Someone who has more than $2,000 in assets will not be able to get any governmental benefits, according to Life Happens. It is likely that your policy will be over that amount, and you will disqualify your children accidentally from any benefits available.
You can create a special needs trust instead. This is where the money goes, and your child isn't then directly affected.
Other Finances Will Tip Them Over
Even if the life insurance doesn't disqualify your child for government benefits for some reason, the other financial elements you'll leave behind likely will. This will include any investments and your retirement plan. You can leave all these to the special needs trust instead, which your child may have access to.
Your Will Won't Control Your Life Insurance
If you've made the mistake by naming your child as your life insurance beneficiary, you may think your will can override this. That isn't the case. The life insurance will still be paid out, and your child is stuck unable to claim for any necessary benefits to help with his or her way of life. Your will ends up covering all those finances that don't have a beneficiary.
Run the Risk of No Special Trust
If you haven't already set up the special needs trust, you run into a problem of no beneficiary for your estate. The money may automatically go to your child, causing problems with governmental benefits again. By setting up the special needs trust for your life insurance, you are then more likely to set that up as the beneficiary in your will.
Guardianship of Minors Required
If your child is still a minor, the insurance company may refuse to pay out right away. This is because a guardianship of minors is required. You may have already set this up, but if not, this will be another legal element for your family members to take into account after your death. Your child is left without the finances he or she needs.
It's time to get your finances in order. Leaving money to your special needs child through life insurance may seem like a good idea at first, but it could be the worst thing you do. Consider setting a special needs trust up to protect his or her benefit entitlement.
For life insurance, contact a company such as Daniel L. Rust Insurance.