When you start a new job you may be offered a wide range of employee benefits, from retirement accounts to life insurance. If you are the parent of a child with special needs, the decisions you make when signing up for these benefits could have dramatic consequences well down the road. Here are some things to think about when it comes time to make those important employee benefit elections on your first day. (Of course, if you made different choices, there is always time to change your plan.)
Don't name a child with special needs as a direct beneficiary of a retirement account
When you first set up an IRA or 401(k), you have to name primary and contingent beneficiaries to receive the funds in the account if you pass away. In most cases, your first thought will be to name your spouse or partner as the primary beneficiary and your children as the contingent beneficiaries. However, if one of your children has special needs, this decision could be disastrous for several reasons. First, if your child is receiving government benefits, a sudden influx of income from an inherited retirement account could ruin his access to those benefits. Second, most retirement accounts pay out a set amount of money per year to the designated beneficiaries, and this amount could be much more than a person with special needs can or should handle on his own. Finally, you may be able to set up a special needs trust to appropriately hold the retirement funds.
Evaluate how much life insurance you may need and designate the appropriate beneficiary
Many companies offer basic life insurance coverage as part of a benefits package, with the option to purchase additional insurance at a discount. As discussed above, naming a child with special needs as the beneficiary of a large life insurance policy could create havoc for the child later on. However, life insurance does provide a great planning opportunity for parents of children who may require significant care because the death benefit can be used to fund a special needs trust with a significant amount of money. If your company offers additional insurance, it may be prudent to purchase it and name a special needs trust as the beneficiary. Furthermore, if you are concerned about being "fair" to your children without special needs when it comes to inheritance, you may decide to leave them your retirement accounts while using a life insurance policy to take care of your child with special needs.
Long-term disability insurance may be worth it
Because families of children with special needs often face significant costs, you have to give serious consideration to what your family's financial position would be if you were to suddenly lose your job due to disability. Many companies allow employees to purchase long-term disability insurance and some offer it for free. If you are the primary wage earner and you don't have substantial savings to care for your family if you are disabled, then it may make sense to sign up for disability insurance from the get-go so that you know your family will be protected if something happens to you.
If you are starting a new job, or if it is time to review your employee benefits package at your current job, take a moment to go over your benefits with your special needs planner. You may be able to take advantage of benefits you never even knew you had.Article Last Modified: 08/03/2011
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