There are two types of insurance you should be aware of:

Whole life insurance – provides coverage that lasts your entire life. As long as premiums are paid, your beneficiary will get the same income tax-free death benefit payment. Whole life also includes a cash value component. Two advantages for parents of a special needs child:

• If there are any expensive medical emergencies you can borrow funds from the cash accumulated in the policy.
• Once the cash value of the policy grows, it can be used to pay your premiums, thus lowering your monthly expenses.

Term life insurance – A term policy is written for a specific duration, usually between 10 and 30 years and has no cash value. Term life insurance typically costs less than Whole Life for a given amount of coverage. However, once the term is over, there is nothing to leave for your child. But it can be converted with a rider established at the time of coverage. You can convert your Term policy to a Whole Life policy without needing a medical exam.

A heartbreaking problem: What if you expect to outlive your child?

In such cases, parents are often left with considerable debts (due to catastrophic medical costs and caretaker expenses) to go along with their grief. Also, wages and career opportunities are lost due to months or years of absence from the workforce. Life insurance can help lessen the burden.

While children’s Whole Life policies are available, they generally may not be sufficient, and many special needs children may not qualify. However, when you get your own policy, you can take advantage of a child coverage rider. Some policies may also give the option of conversion when a child turns 25.

When you die with only a basic estate plan, all your assets are frozen until your will goes through probate.

Here are the advantages of naming a Special Needs Trust as a beneficiary for your insurance policies:

• A trust gives control of your assets immediately upon your death, without having to wait for your estate to be probated.
• A trust contains clear directions on how the assets can be used for the benefit of your child.
• Uniform Transfers to Minors Act (UTMA) prevents leaving assets to a minor, but you are allowed to leave assets to a trust which benefits a minor (your children).
• Most importantly, holding assets in a trust may help the child qualify for government benefits.

You will need an attorney to create the trust for you. I recommend working with the Special Needs Alliance, a national non-profit organization of attorneys dedicated to the practice of disability and public benefits law. I can work with you and your lawyer to help you figure out the best way to fund the trust in a way that works best for your family.