An Integrated Approach to Special Needs Planning

Advisors must consider quality of life,
provisions for which might last a lifetime

By Joan H. Cleveland, CLU, ChFC, REBC, LTCP

Ms. Cleveland is Senior Vice-President, Business Development for Prudential Insurance Company of America. She can be reached at

‘Special needs’ is a widely used term applied to a variety of disabilities in multiple contexts. These needs may result from an accident or a birth injury; a delay or disorder in cognition, development or emotions; or medical and physical issues, among other causes. If you haven’t worked with families who have members with special needs, you’re overlooking a market that can be both professionally and personally rewarding. It’s a unique market, however, and you’ll need additional training and knowledge to integrate a plan’s components successfully.

Estate planning provides a good example. With most clients, you plan for their estate needs and goals and determine the best strategy for achieving their desired outcomes. But estate planning for families who have a child with special needs is not just about the potential impact of an estate tax bill when a parent dies. You must also consider providing the child with sufficient financial support to help him or her meet future needs, which may very well last a lifetime. Additionally, if planned improperly, a child could lose his or her eligibility for much needed government benefits.

Special needs planning goes far beyond providing lifetime care, though: it also involves planning for the quality of life for the individual. Providing these planning services takes more dedication, empathy, patience and sensitivity than any other market. This article discusses several key considerations and tools for working with these clients.

Avoiding Eligibility Disruptions

Individuals with special needs may qualify for benefits from several government programs. These programs include Supplemental Security Income (SSI), Medicaid, Social Security Disability Insurance (SSDI) and Social Security Survivor’s Benefits. (See the Resources sidebar for links to additional information.)

As an advisor, you need to understand the programs’ qualification guidelines to be sure your planning does not result in disrupting the recipient’s eligibility. That requires expertise as each benefit program determines an applicant’s eligibility separately from the other programs. SSI, for instance, provides cash to meet basic needs for food, shelter and clothing. The key financial issues from an advisor’s perspective regarding SSI eligibility are:

  • That the child must have a disability that meets the federal statutory definition and must also meet the income and resource tests, in addition to other criteria.
  • If a child has limited income and assets, he or she likely will be eligible for SSI benefits upon reaching age 18. For lower-income families, children under age 18 may also be eligible. An important point to note: SSI benefits generally are denied to any applicant whose assets exceed $2,000 ($3,000 for a couple).
  • If a child is eligible for SSI, he or she likely will be eligible for Medicaid.

Families that violate the income- and resource-limits for recipients significantly risk disrupting the special needs person’s eligibility. In some cases a simple joint savings account or a Uniform Gift to Minors Account (UGMA) can disqualify a child. This can happen in other scenarios too as no one plans for the arrival of a child with special needs. Perhaps a grandmother’s will, which was written years ago, names all of her grandchildren as equal beneficiaries to her estate. Another common mistake: a parent wrote ‘Children’ in the beneficiary designation for his company-provided life insurance benefit before the birth of a daughter with special needs. Part of your advisory role is to review the relevant aspects of the family’s finances to avoid unexpected benefits disruptions. That review should include a discussion of the assets held by the individual with special needs, the current will, the families legacy plans and their assets with their beneficiary designations.

Special Needs Trusts

As an advisor, you need to understand the programs' qualification guidelines to be sure your planning does not result in disrupting the recipient's eligibility. That requires expertise as each benefit program determines an applicant's eligibility separately from the other programs.

One of the most useful techniques for providing funds to a special needs person without jeopardizing his or her benefits is to create a special needs trust (SNT). A SNT is established through a legal document, prepared by an attorney with expertise in special needs law, for the benefit of the individual- a child, spouse or surviving parent- with a disability. It may be created either while the grantor, the person establishing the trust is alive, in which case it’s called an intervivos SNT, or be created through a will as a testamentary trust.

The SNT must indicate that the trust's assets will provide supplemental and extra care over and above government benefits, not in place of those benefits. With a properly structured SNT the trust’s assets will not be counted when qualifying the trust beneficiary, the individual with special needs for government benefits. Non-countable assets placed in a SNT can include, for example, funds to provide for:

  • Medical care
  • Therapy
  • Education
  • Training
  • Companionship
  • Living Expenses (cell phone bills, etc.)
  • Entertainment
  • Other benefits that public assistance might not fund, or might not fully fund

Each family must determine how it will fund the SNT, depending on its finances and available resources. Some can fund it from general savings or investments; however, life insurance is an appropriate funding vehicle for several reasons, particularly since the death benefit creates an instant estate. The death benefit usually avoids probate and is income tax-free; when the policy is owned by an irrevocable life insurance trust, the benefit can also be estate tax-free. Many policies may also be designed to fit the premium payments within the owners budget.

If you’re considering life insurance as a funding vehicle, keep in mind that:

  • The special needs trust and its funding should be integrated with the remainder of the parents’ estate plan.
  • Survivorship (second-to-die policies) are commonly used to fund these trusts.
  • A family’s first-to-die needs such as income replacement, childcare and debt repayment should be addressed before the second-to-die needs.
  • Due to the nature of special needs planning, clients should consider only policies that offer lifetime, contractual guarantees of both the premium and death benefit.

Letter of Intent

Another document to consider for your clients’ plans is the Letter of Intent. Although it’s not a legal document, the Letter of Intent allows clients to share personal, financial and medical information, topics that aren’t covered by wills and trusts, with a future guardian and/or caregiver. Some key points to keep in mind as you discuss the Letter of Intent with clients include the fact that writing a Letter of Intent can be an emotionally daunting process. Parents, for example, must look far into their child’s future, though for some, the farthest they have looked since their child’s birth is next week. An advisor should be prepared to assist those clients who find the Letter-writing process overwhelming. Christopher Carrieri,  Manager, Financial Services out of Prudential’s North Shore agency in Huntington, Long Island, NY has found it helpful to show clients Prudential’s model Letter of Intent and then go over it with them in detail.

  • Parents can begin writing the Letter of Intent with information that’s easily accessible, such as the list of physicians or a recent Individualized Education Program (IEP).
  • Both parents should contribute to complete the Letter of Intent.
  • If possible, the parents should also ask their child about his or her wishes for the future (such as college) so those can be reflected in the document.
  • When a parent is contemplating a potential future guardian and trustee, it is helpful to share the Letter of Intent with them to ensure their understanding of the situation. This gives the individuals the opportunity to ask questions about the parents’ intentions and provide assurance to the parents that they are truly willing to accept the role.


  1. Supplemental Security Income program:
  2. Center for Medicare and Medicaid Services:
  3. SSA Brochure Benefits for Children with