Are there any government or private insurance products to help pay for future care of a disabled child?
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Asked March 13, 2012
There is not a type of insurance that is specifically designed to help with the care of a disabled child, either private or sponsored by the government. However, you can set up a whole or universal life insurance policy so that it pays into a trust fund for your child. Doing this would not only help the child while you are living, it will also provide a source of income for the child after you are gone.
Life insurance policies can be set up with anyone as the beneficiary. But since your child is disabled, it might make better financial sense to name a trust fund as the beneficiary and owner of the policy. Doing it that way, the accrued cash value would be available for withdrawal or borrowing during your lifetime, and then the policy will pay out to the fund after you die. The fund could then be set up to make regular payments to your child, or to handle regular expenses on behalf of the child.
A whole life policy is probably going to be the type of insurance that is able to do the most good for your child. If you run into financial difficulties while you are living, money can be borrowed from the policy to pay for emergency care or supplies. And once you are gone, the pay out from the account could be allotted to pay for the care and home of the child, to supplement medical care, or whatever needs the child may have.
Medicaid is available for low income people, providing necessary medical care for those who are not able to afford the expense out of pocket. However, if your child receives Medicaid, it becomes even more important for your life insurance policy to name a trust as the beneficiary of the life insurance policy. If the policy pays directly to the child instead of into a trust, then the money would be considered income and could jeopardize the Medicaid. By naming a trust as the beneficiary, a portion of the money can be ear-marked for supplemental care of the child, where naming the child as the beneficiary could eliminate the Medicaid coverage completely and quickly eat through the proceeds of the life insurance policy.
Answered March 13, 2012 by Anonymous