Whole Life Insurance and a Supplemental Special Needs Trust: A Smart Combination for Providing Life-long Care for Family Members with Disabilities
Aug 6, 2009
Springfield, Mass., August 6, 2009 – Paying for life-long care for a family member with disabilities can be financially overwhelming. “Not knowing how your child will be cared for after you’re gone is a heavy burden that weighs on most parents of children with special needs,” said David MacLaren of Fortville, Ind., parent of four children, three of whom have special needs.
“Combining a Supplemental Special Needs Trust (SSNT) with permanent life insurance, such as whole life insurance, is a powerful one-two combination that can ensure there will be financial resources available to pay for a loved one’s care over the long term,” said Kevin Clasen, a MassMutual Special Care Planner with West Point Financial, a general agency of Massachusetts Mutual Life Insurance Company (MassMutual).
For some families, the combination has answered their long-nagging questions and soothed their long-standing fears. MacLaren and his wife Ann have 14-year-old autistic twin sons and two adopted daughters, one of whom is legally blind. A special needs trust funded by a combination of whole and term life insurance was just what they needed to provide for their children’s future care, while not endangering their eligibility for federal benefit programs.
“We feel a tremendous amount of confidence and relief now that we have our plan in place,” said MacLaren. “We know who will care for our children, and how that care will be paid for.”
While there are many ways to fund trust accounts, permanent life insurance, particularly whole life insurance, is very effective.
“I consider whole life insurance to be perfect for these types of situations. Most importantly, it is permanent, so as long as the MacLarens pay the premiums, it will be there to fund their children’s future care, no matter what happens” said Drew Stuart, a MassMutual Special Care Planner at West Point Financial working in collaboration with Clasen and the MacLarens. “It’s a rock-solid foundation on which to build a plan.”
In addition, whole life insurance has other attributes that can make it ideal for families that are developing long-range plans for members with disabilities.
“Whole life insurance policies have premiums that never rise and they build up cash value, so parents or guardians can borrow from these savings in an emergency or, for example, to purchase a needed piece of equipment or specialized therapies,” said Clasen.
Creating a Supplemental Special Needs Trust and funding it with life insurance are only two parts of a comprehensive life care plan. “Parents should take care to write and update their wills, ensuring that each coordinates with the other,” said Joanne Gruszkos, director of SpecialCare, MassMutual. “They should also consider writing a Letter of Intent that, while not a legal document, supplements the will by providing detailed information about the family member’s routines, contact information, medical issues, parental preferences for the family member’s living situation, and other such matters that are not appropriate for a will.”
For more information and resources, including a Letter of Intent template and free guides that can help you start planning, visit www.massmutual.com/specialcare/resources.
Note: Distributions under the policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty. Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company’s strong and growing network of financial professionals helps clients make good financial decisions for the long-term.
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, Inc., member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.