Using Life Insurance to Support Loved Ones with Special Needs

Families caring for individuals with developmental disabilities, autism, or other special needs face unique long-term planning challenges. One of the most powerful yet often overlooked tools in this process is life insurance—especially when paired with a Special Needs Trust (SNT).

Why Life Insurance Matters

A traditional inheritance can disqualify a person with special needs from vital government benefits like SSI or Medicaid. Life insurance, if structured correctly, avoids this risk and provides lasting financial support.

The Right Structure: Special Needs Trust (SNT)

Instead of naming your loved one as the policy’s beneficiary, name a Special Needs Trust. This:

• Protects benefit eligibility

• Allows flexible use of funds

• Can cover expenses not paid for by public programs (e.g., therapy, travel, technology, caregiving)

There are two types:

• Third-party SNT: Funded by family (ideal for life insurance)

• First-party SNT: Funded by the individual’s own assets

  
  

Often Missed: Using the Policy While Alive

• Permanent life insurance (like whole or universal life) builds cash value.

• This cash can be accessed while you're alive to help pay for:

  • Private therapies

  • Out-of-pocket medical expenses

  • Day habilitation services (structured programs for skill-building, socialization, and independence)

  • Caregiver support

    
    

Key Planning Tips

• Work with a special needs planner or attorney

• Use a third-party SNT as the beneficiary—not the individual

• Consider naming a trusted trustee or co-trustee to manage the trust

• Review state-specific Medicaid/SSI rules

  
  

Bottom Line

With the right life insurance and trust in place, you can:

• Ensure quality of life for your loved one without disrupting their benefits

• Provide support for day-to-day needs like day habilitation programs

• Give peace of mind to caregivers and future guardians

  
  

Life insurance isn’t just about what happens after you’re gone—it’s about building a secure, supported life now and in the future.

Much Love,

Briana M