Alert to Parents of a Special Need Child

You may need to change the beneficiaries of your life insurance, annuities, IRAs, or other retirement accounts.

The process of special needs planning involves developing a total plan to provide for the child’s lifetime care. Ownership of assets must be coordinated with legal documents (such as trusts, wills and beneficiary designations) to avoid the loss or reduction of any government or other benefits for which the child may be eligible.

Assets can pass from one individual to another individual in a variety of ways. Assets may be transferred by sale or by gift. At death, assets may pass through a will or under intestacy laws and be distributed by the estate. Assets may be distributed by trusts. Certain assets will be distributed through operation of law. These include assets held jointly (such as real property held in joint tenancy, or as tenants in the entirety) that avoid the probate process and go directly to another named person. Other assets can pass through operation of contract. These usually include life insurance policies, annuities, IRAs, and certain other types of retirement accounts that permit the owner to name beneficiary. These types of assets typically avoid the probate process (unless the estate is named beneficiary), passing directly to the named beneficiary.

Even the very best plans can go astray if all the pieces of the puzzle are not fitted together correctly. Distributions specified in wills can result in money going directly to a child with special needs (for example, a provision that requires that the residuary estate be divided equally among the decedent’s children, with the share of any predeceased child being divided equally among that child’s children or descendents of predeceased children). Payments made directly to a child with special needs can result in the reduction or even loss of government benefits.

How many parents of children with special needs today have named their children as the beneficiaries on a group or individual life insurance policies, IRAs, 401(k) plans, profit sharing plans, or defined benefit pension plans? How many parents have forgotten whom they have named as beneficiary? How many parents never named a beneficiary? When the parent dies, the terms of those policies and retirement plans will govern the distribution of the money – usually requiring distribution to the named beneficiary or, if none is named or living, to the estate. If the child with special needs receives the money, this could produce disastrous results.

When planning for the financial future of a child with special needs, all beneficiaries of insurance policies, pension plans, IRAs, and annuities, need to be reviewed. If the parents have established a special needs trust for the child, the trust should be named as beneficiary, so not to compromise the child’s benefit eligibility. One mistake, a forgotten policy, or a beneficiary designation not updated can unravel the best of plans!

Due to the complexity of federal and state laws, you may require specially trained professionals to help you plan for the future of your child(ren) with special needs. Call MetDESK® Specialist, Diann Collins, MBA, at (302)781-1055 for a confidential consultation, or visit her website at http://www.dianncollins.com for more information. MetDESK® is MetLife’s Division of Estate Planning for Special Kids

For more information about this and other related topics, visit the MetDESK website at www.metlife.com/desk or call 1-877-MetDESK (1-877-638-3375).