Special Needs Trust and Life Insurance offers an effective way to protect the financial future of an adult with special needs. When structured thoughtfully, combining a properly drafted special needs trust (SNT) with tailored life insurance can preserve eligibility for public benefits while securing necessary resources. At Diversified Insurance Brokers, we specialize in this delicate planning, helping families use life insurance to fund trust needs—without jeopardizing Medicaid, SSI, or other supports.

Why Combining a Special Needs Trust with Life Insurance Works

Adults with special needs often require lifelong care—covering medical costs, therapy, housing, and quality-of-life services. A special needs trust allows funds to be managed and distributed in a way that supplements benefits without disqualifying the beneficiary. Life insurance can serve as an inexpensive, reliable funding source, delivering a lump sum at the insured’s passing directly into the trust.

How It Works

The typical setup involves purchasing a life insurance policy—often a guaranteed issue or simplified issue policy—naming the SNT as the beneficiary. Upon the insured’s death, the death benefit settles directly into the trust. Because life insurance proceeds are generally paid outside of probate, it provides timely liquidity for immediate trust needs. Meanwhile, the trust continues to operate, ensuring the beneficiary retains eligibility for Medicaid, SSI, and other supports.

Who It’s For

This planning strategy is ideal for:

• Families with adults who rely on means-tested public benefits
• Those concerned about future care, housing, or therapy funding
• Caregivers planning for the long-term financial well-being of a loved one with special needs
• Individuals seeking a tax-efficient, managed inheritance structure

Why Work With Diversified Insurance Brokers

With over 40 years of experience, Diversified Insurance Brokers brings deep expertise in both insurance and special needs planning. We understand the nuances of trust law, public benefits rules, and carrier underwriting. We’ll guide you through: drafting or coordinating with your attorney on the SNT, choosing the right policy type (guaranteed issue, simplified issue, or traditional), estimating the appropriate death benefit, and selecting a carrier that supports your trust’s objectives.

Your advisor will ensure that policy ownership, beneficiary designation, and trust structure work in harmony—so the funds reach the trust quickly and without complications. We also help families review and maintain the policy over time, ensuring it continues to serve the beneficiary’s best interests as needs change.

For more detailed coverage options designed specifically for adults with special needs, visit our Special Needs Life Insurance page.

Steps to Get Started

Speak with your estate planning attorney to establish or review your special needs trust. From there, our advisors will: gather information on the beneficiary’s needs, propose suitable life insurance options, illustrate death benefit funding scenarios, coordinate with your trust document, and assist with application and issuance.

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