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Alert to Parents of a Special Need Child
You may need to change the beneficiaries of your
life insurance, annuities, IRAs, or other retirement accounts.
The process of special needs planning involves
developing a total plan to provide for the child’s lifetime care.
Ownership of assets must be coordinated with legal documents (such as
trusts, wills and beneficiary designations) to avoid the loss or
reduction of any government or other benefits for which the child may be
eligible.
Assets can pass from one individual to another individual in a variety
of ways. Assets may be transferred by sale or by gift. At death, assets
may pass through a will or under intestacy laws and be distributed by
the estate. Assets may be distributed by trusts. Certain assets will be
distributed through operation of law. These include assets held jointly
(such as real property held in joint tenancy, or as tenants in the
entirety) that avoid the probate process and go directly to another
named person. Other assets can pass through operation of contract. These
usually include life insurance policies, annuities, IRAs, and certain
other types of retirement accounts that permit the owner to name
beneficiary. These types of assets typically avoid the probate process
(unless the estate is named beneficiary), passing directly to the named
beneficiary.
Even the very best plans can go astray if all the pieces of the puzzle
are not fitted together correctly. Distributions specified in wills can
result in money going directly to a child with special needs (for
example, a provision that requires that the residuary estate be divided
equally among the decedent's children, with the share of any predeceased
child being divided equally among that child's children or descendents
of predeceased children). Payments made directly to a child with special
needs can result in the reduction or even loss of government benefits.
How many parents of children with special needs today have named their
children as the beneficiaries on a group or individual life insurance
policies, IRAs, 401(k) plans, profit sharing plans, or defined benefit
pension plans? How many parents have forgotten whom they have named as
beneficiary? How many parents never named a beneficiary? When the parent
dies, the terms of those policies and retirement plans will govern the
distribution of the money - usually requiring distribution to the named
beneficiary or, if none is named or living, to the estate. If the child
with special needs receives the money, this could produce disastrous
results.
When planning for the financial future of a child with special needs,
all beneficiaries of insurance policies, pension plans, IRAs, and
annuities, need to be reviewed. If the parents have established a
special needs trust for the child, the trust should be named as
beneficiary, so not to compromise the child's benefit eligibility. One
mistake, a forgotten policy, or a beneficiary designation not updated
can unravel the best of plans!
Due to the complexity of federal and state laws, you may require
specially trained professionals to help you plan for the future of your
child(ren) with special needs. Call MetDESK® Specialist, Diann Collins,
MBA, at (302)781-1055 for a confidential consultation, or visit her
website at http://www.dianncollins.com for more information. MetDESK® is
MetLife’s Division of Estate Planning for Special Kids
For more information about this and other related
topics, visit the MetDESK website at
www.metlife.com/desk or call
1-877-MetDESK (1-877-638-3375).
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