Life Insurance & D4A Trust for Your Special Needs Granchild

Life insurance is a key part of the financial portfolio for many working adults today. For grandparents, the purchase of life insurance is often designed to support the financial expenses associated with estate expenses but may also be purchased to provide some financial benefit to a grandchild. If you are considering the purchase of life insurance for yourself, and will name your grandchild as your beneficiary, it is important to know what legal and financial implications may be involved in the grandchild is disabled.

For a grandchild with disability, there is great financial need to manage not only the health care expenses but also the associated living expenses. As a grandparent, it is not uncommon to feel as if you can contribute in some way by leaving a life insurance benefit to your grandchild when you pass away. Before setting up the life insurance plan for yourself, be certain you speak with a financial planner about the financial and legal implications associated with leaving your life insurance to your disabled grandchild as the beneficiary.

To ensure your grandchild has access to the life insurance benefits you intend to bequeath, a specific type of trust will need to be established for the grandchild. Because your grandchild most likely qualifies for Medicaid and other public funded health programs, the receipt of a life insurance payment may result in loss of those vital benefits. To ensure your grandchild is afforded the benefit of these public health programs, while still being able to access the life insurance benefits, a financial planner should ensure a d4A trust is established for your grandchild.

A d4A trust is a trust that is designed to benefit a special needs child, or anyone under the age of 65. When any type of inheritance, such as a life insurance payment, is left to a special needs individual, those benefits can be protected when left into a d4A trust. In doing so, these benefits and funds are not considered as assets or income for the purposes of qualifying for social security income benefits or Medicaid. This is a vital issue especially when your children are going to continue caring for your grandchild for many years to come.

In the economic structure of today, many elderly adults have considered the purchase of life insurance for the purpose of financially supporting their grandchildren after their passing. If you are considering this option as a way to support your children and grandchildren, be certain you meet with a financial planner who can assist you in establishing a d4A trust for your grandchild with special needs.