Who should we put as our beneficiary?

May 6, 2007 12:02 PM

How does one provide life insurance benefit for someone who cannot have an income?

Background: My husband's son, 13 now, is autistic. He will never be self-sufficient and will be on his parents' insurance until 18 and SSI thereafter. But to qualify for SSI/Disability we are told that he cannot have assets/income above a very low amount or he no longer qualifies(until his medical/housing care bleeds all of the money dry and can re-qualify for benefits) So right now he has the plans benefitting his son's mother.
What other options does he have? I think a trusteeship would be something to look into, if it shields the money and keeps him on SSI. Of course we hope to be around a very long time to take care of him, but this getting older is scary and we worry.

posted by Jazz Hands to work & money (8 comments total)

Looks like your son needs a Special Needs Trust. As the linked page's title suggests, "Special Needs Require Special Lawyers."
posted by ikkyu2 at 12:18 PM on May 6, 2007

Seconding the special needs trust (or "supplemental needs trust"). This is a common problem and I think you should be able to find a lawyer who can do it as a routine, hopefully inexpensive, matter.
posted by grobstein at 12:50 PM on May 6, 2007

I live in a country with free health care but my adult brother is in a similar situation (in long-term care and dependent on disability benefits which will cease if his income increases). My parents have set up a trust to administer the money he inherits after their death for similar reasons to yours. I don't know that much about it, I'm afraid, but from a bare bones description it seemed a good solution. Hope this small bit of info helps.
posted by poissonrouge at 12:56 PM on May 6, 2007

Yep. You need a lawyer. As I understand it, these trusts can supplement his SSI/Medicaid for his life with the remainder to reimburse the state for the expenses. You can designate someone to take whatever might be left over.
posted by jaysus chris at 1:01 PM on May 6, 2007

A special needs trust is not that hard -- it's basically following some key (and now nearly standard) language excluding any payment by the trust for any thing actually or possibly covered by a government benefit. See Nolo Press for DIY publication.
posted by ClaudiaCenter at 1:32 PM on May 6, 2007

As a lawyer who routinely works with SNTs, again I assert that I don't think I would suggest putting together your own SNT on a DIY basis.

This is not an uncontested divorce. This is not a no-asset bankruptcy. This is not a small claims court case where $50 are at stake. On the line are thousands and thousands of dollars of life-long, critical, extremely quality-of-life-impacting benefits from federal governmental agencies that will utilize a detail-oriented approach not necessarily respectful of your "good faith" efforts to comply with a body of federal law most non-specialist lawyers find too nitpicky to understand. That is to say, the federal government will cut off benefits if the law is not complied with to the letter, without caring at all that you did your own Westlaw study, downloaded forms and filed in good faith missing only a stupid, esoteric and silly legalese item. What is "covered by a governmental benefit" and allowed to be paid by the SNT are matters of the interpretation of very detail-oriented case law. I frequently work with preeminent brain injury, personal injury and trust attorneys who feel this area is too confusing and as such involve a specialist to handle these questions.

I think a guesstimate (which you are in any case advised not to rely on but rather to do searches and make inquiries) would be that most lawyers charge about $3,000 to set up an SNT andf get federal government pre-approval to guarantee continuation of benefits. This has the potential to save that much or more money on a MONTHLY basis for this individual's LIFE. I understand that not everyone has that kind of cash lying around and it is a significant investment, but that's what it is - an INVESTMENT that pays off not in dollars but in a lifelong availability of benefits and standard of care available to your husband's son.

Look, separate from the standard legal disclaimers and beyond just covering my own butt, I'm not a lawyer giving you legal advice here but merely suggesting that a whole lot is on the line here. You'll need a property and legal guardianship, the appropriate spendthrift and SNT-type trusts, etc. If you're hard up enough for money that a lawyer is your last resort, maybe you can speak with local social workers who routinely handle the protection and administration of benefits - who may at a minimuj be able to refer you to a courteous, considerate understanding attorney with affordable costs. You will have a lot of options, and the appropriate specialists can help you arrange the affairs the best you can to protect this young man for his life beyond the time you and your husband expect to be able to do so.
posted by bunnycup at 2:38 PM on May 6, 2007

If you are low-income and you live near a major law school, they may have a legal clinic on site that can walk you through this. (Though it sounds like if you are in a position to set up a trust, you are in a position to follow bunnycup's excellent advice above.)
posted by availablelight at 3:14 PM on May 6, 2007

With regard to bunnycup's cautions, let me just add that I've seen what happens when small, unwitting errors deprive special-needs persons of their SSI. To be quite frank, it is a catastrophe. If you're going to do this, spend a few bucks and get it right the first time.
posted by ikkyu2 at 7:43 PM on May 6, 2007