Cerebral Palsy: Money, Education, Insurance and the Law

Life insurance deals with financial risks of death. The principal financial risk of death in most families is that the death of the wage provider will deprive dependents of support. Consequently, life insurance coverage should be considered primarily for the parent or parents whose earning power the children depend on, rather than on the lives of the dependents.

You need to know whether or not the insurance provided is adequate to meet the financial needs that will arise if you die. A reputable insurance agent can help you determine whether your coverage is adequate, as well as helpful calculation through Consumer Guides that many organizations provide free of charge. Before you can buy insurance, however, you need to know what kind of insurance you need.

There are two basic kinds of life insurance policies: “term” life insurance, which provides pure insurance without any build-up of cash value or reserves; and other types, called “whole life,” “universal life,” and “variable life,” which include a savings or investment factor in addition to insurance. The latter forms of insurance, sometimes called “permanent insurance,” are really a combined package of insurance and investment.

People with children who do not have disabilities try to assure that their children’s education will be paid for if they die before their children finish their educations. Many people use life insurance to deal with risk. When their children are grown and educated, this insurance need disappears. Term life insurance is a relatively inexpensive way to deal with risks of this kind. People with cerebral palsy, on the other hand, may need supplemental assistance throughout their lives. That need will not disappear completely during their parents’ lifetimes. If the parents plan on using their life insurance to help meet this need when they die, they must recognize, in deciding what kind of insurance to buy, that term life insurance premiums rise sharply as they get older. Consequently, they should either consider a savings or investment program to eventually replace the term insurance, or consider purchasing whole life or universal life insurance.

Whether you buy term life insurance and maintain a separate savings and investment program, or instead by one of the other kinds of life insurance that combine them, you should make sure that the insurance part of your program is adequate to meet your family’s financial needs if you die. A sound financial plan will meet these needs and will satisfy savings and retirement objectives in a way that does not sacrifice adequate insurance coverage.

Finally, it is essential that you coordinate your life insurance with the rest of your estate plan. This is done by designating the beneficiary – that is, by deciding who is to receive any insurance proceeds when you die. If you wish any or all of these proceed to be used for your child’s support, you may wish to designate a trustee in your will or in a separate revocable life insurance trust. Upon your death, the trustee will receive the insurance proceeds and use them to benefit your child in accordance with the trust. If you do not have a trustee, your child’s inheritance may be subject to cost-of-care claims (state requirements to pay for your cost of living in a state-run facility if you have the means to do so) or may interfere with eligibility for government benefits.

When it comes to estate planning, the parents of a child with cerebral palsy must pay more mind than most parents. Because of concerns of cost-of-care liability, government benefits, and competency, it is vital that you make carefully thought-out plans. Parents need to name the people who will care for their child with cerebral palsy when they die. They need to review their insurance to make sure it is adequate for their child’s needs. They need to inform grandparents of cost-of-care liability, government benefits, and competency problems so that the grandparents do not inadvertently waste resources that could otherwise benefit their grandchild. Most of all, parents need to make wills so that their hopes and plans are realized, and the disastrous consequences of dying without a will are avoided.

Proper estate planning differs for each family. Every will must be tailored to the individual needs of the family. While there is no formula will that every family can use, there are some mistakes that can be avoided.

Having no will at all at the time of your death can be detrimental to your cerebral palsied child’s future. In most states, if a married person dies without a will, his or her children are entitled to equal portions of their assets at the time of death. If a single parent dies, the entire estate is divided equally among his or her children. The end result is your child with cerebral palsy receiving money in his or her own name. This will interfere with cost-of-care liability and government benefits, resulting in not enough money to pay for his or her health care, but too much money to qualify for government aid. The same problems will occur if you leave property outright to you child with cerebral palsy, as the property will then add to any assets he or she may have in their name, thus disqualifying them from government benefits. Creating a support trust for your child with cerebral palsy in your will may lead to the same problems as having no will at all or leaving property to you child, therefore, you should enlist the help of a qualified lawyer to help draft a will that avoids these problems.

As mentioned above, the same consequences may occur if your life insurance policy directs proceeds to your child with cerebral palsy. It is quite important that a separate beneficiary be named so that the proceeds will be able to best benefit your child.