Securing a loved one's future with a special needs trust

Securing a loved one's future with a special needs trust

When you’re the parent or caretaker of an individual with special needs, thinking about how your loved one will be taken care of in the future is a definite concern.  This is especially important if you want a level of care for your loved one that goes above and beyond what they may be provided if they qualify for government benefits. A special needs trust funded with a life insurance policy may be a great option for you.

About special needs trusts

A special needs trust is designed to help you leave behind assets with the assurance they will be used to support an individual with special needs.

You and other family members can contribute to the trust and it can help take care of any supplementary needs the individual may have that are not covered by government benefits, without jeopardizing his or her eligibility for need-based benefits from Medicaid or Security Supplemental Income (SSI).

This is a big consideration because those benefits programs typically require recipients to have about $2,000 in assets and place limits on their income (varies by state).


  • The special needs trust is designed to coordinate with other programs, thereby helping to ensure the individual remains eligible for state and federal government benefits.
  • A special needs trust can help assure the caregiver that the financial needs of his or her loved one are met.
  • The cash value from the life insurance grows tax deferred and is accessible during the life of the caregiver via loans.
  • Proper planning provides for the individual’s continued support, quality of life, and dignity.

How it works

  • A special needs trust is typically funded with a permanent life insurance policy on the life of the caretaker(s) of the person with special needs.
  • The cash value in the life insurance policy accumulates on a tax-deferred basis and can be accessed by the trustee on a tax-favored basis (as long as the policy remains in force), via policy loans.
  • At the insured’s death, the death benefit is paid to the trust and the trust coordinates the funds with government benefits to provide financial resources for the care and support of the person with special needs. The death benefit of the life insurance policy passes to the trust on an income-tax free basis.
  • Once the basics of food, shelter, medical care and education are met by the government, the trust can provide additional funds to enhance the quality of life of the person with special needs.


  • The strategy will require the assistance of an attorney who specializes in special needs planning, along with your financial professional.
  • The individual with special needs generally should not be a designated beneficiary of any retirement accounts, life insurance, annuity contracts or brokerage accounts. These financial assets could jeopardize eligibility for government benefits.
  • When a special needs trust is used, the trust beneficiary cannot have direct access to assets — trust distributions should be at the trustee’s sole discretion.
  • Life insurance may be needed on the lives of the primary caregiver AND the primary breadwinner, if not the same person.

Next steps

Ohio National offers support for you in planning for individuals with special needs, including a needs calculator, attorney locator guide and an informative Special Needs Planning brochure.

Contact your Ohio National financial professional today to start planning for your loved ones with special needs.

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Life insurance is issued by The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation. Guarantees are based on the claims-paying ability of the issuer.

If tax-free loans are taken and the policy lapses, a taxable event may occur. Loans and withdrawals from life insurance policies that are classified as modified endowment contracts may be subject to tax at the time that the loan or withdrawal is made and, if taken prior to age 59½, a 10% federal tax penalty may apply. Withdrawals and loans reduce the death benefit, cash surrender value, and any living benefit.

Products, product features, and rider availability vary by state. Issuer not licensed to conduct business in NY.

This provides general information that should not be construed as specific legal or tax advice nor the law of any particular state.  Please seek the advice of a qualified legal or tax professional for your specific situation.