January 2023
Parents who take care of children with disabilities must consider what will happen when they can no longer provide for their loved ones. While a special needs trust can help a disabled child into adult years, different insurance policies may also offer various kinds of assistance. An important thing to remember is that insurance policies vary in their coverage. A caretaker should consider multiple options to fill in coverage gaps. Policies may compensate parents for lost income or help a special needs child directly. Disability insurance A parent who contracts a serious illness or sustains a severe injury might no longer be able to work. Short-term disability insurance can provide assistance for a few months. However, Kiplinger explains that long-term disability insurance may cover a portion of missed income for much longer. This coverage usually pays 40% to 60% of a base salary. Income protection insurance Parents interested in covering more of their income might benefit from income protection insurance. In addition to compensating for lost wages, some income protection policies cover bonuses and commissions. Benefits generally last until the policyholder recovers from an illness or injury, or reaches a maximum benefit period. The loss of benefits happens when one of these two events occurs first. Whole or term life insurance A parent who takes out a life insurance policy may direct it to pay out to a child or special needs trust after the parent dies. Policy Genius explains one way parents who pursue this option could manage such a policy, by naming someone to be the custodian of the policy to manage the insurance funds after the death of the parent. With the variety of insurance policies available, a parent may find one to help complete a special needs plan to help ensure a loved one has provision for years to come. It is important to be thoughtful about how such policies and the proceeds from the policies might be managed, such as through a conservator or through a special needs trust. You should speak with your legal advisor for disability and estate planning issues to help make the best decisions for your family.
A trust is a common document in an estate plan. You can use it to create a definitive plan for your assets and protect your wishes for your estate. It comes with many benefits, and many people use a trust as a means to bypass probate . However, there are many kinds with unique circumstances that can benefit people for varying reasons. Living trust A living trust, also known as a revocable trust, goes into effect while you are still alive, but you retain control and can make changes. Upon your death, the person or entity you named as the successor trustee will obtain control of the trust and be responsible for carrying out your wishes. Special needs trust A special needs trust is an option if you have a family member with a disability. These typically protect the family member’s ability to continue receiving government benefits after your death to ensure their inheritance will not interrupt those benefits. Irrevocable trust An irrevocable trust differs from a living trust in that you cannot change it once it is in effect. The trust is a sovereign entity, paying its own income tax and filing its own return. Many people choose this option to avoid creditors and additional taxes. Generation-skipping trust A generation-skipping trust allows you to leave assets directly to your grandchildren, bypassing your children and avoiding estate taxes. There is a generation-skipping tax, but there are exemptions. As you make your estate plans, you may find it helpful to speak with someone about what options are best for your situation.
If you plan on being the estate executor for a parent, you know that you have great responsibilities ahead of you. Organizing the assets of the estate is one of them. You should know what your parent owns so you can distribute the property to heirs. Creating an inventory of the estate assets is a good first step to managing the estate. However, you should be ready for this process to be hard and time consuming. Check for an existing list Some testators create a list of their assets in advance. Kiplinger explains that an asset list should include various information , such as the following: Accounts Other assets Debts and liabilities Digital asset passwords Online account passwords The list may also contain contact information. Your parent might use an asset list to describe how to get in touch with professional consultants, such as a financial advisor who has previously worked with your parent on asset or tax issues. Gather information from documents In the event you do not have an existing list to work with, you will have to accumulate information from records and contracts your parent owns. You may have to conduct an extensive search through insurance papers and tax records, and then check anything your parent may have put in storage. A common example would be items in a safe deposit box. As the years pass, some people forget about accounts they own. You could run across an old account or an asset like a stock certificate that your parent had hidden away under furniture or in an attic. Creating an asset inventory may take careful investigation to ensure the most complete list possible.
