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How to develop a beneficiary plan

Special needs planning involves developing a total beneficiary plan to provide for a dependent’s lifetime care. Assets must be coordinated with legal documents, such as trusts, wills and beneficiary designations to avoid the loss or reduction of any government or other benefits for which the dependent is eligible.

Assets can pass from one individual to another in a variety of ways. Assets can be transferred by sale or by gift. At death, assets can pass through a will or under intestacy laws and be distributed by the estate. Assets can be distributed by trusts.

Certain assets are distributed through operation of law. These include assets held jointly (such as real property held in joint tenancy or as tenants in the entirety) that avoid the probate process and go directly to another named person.

Other assets can pass through operation of contract. These usually include life insurance policies, annuities, IRAs and other types of retirement accounts that permit the owner to name a beneficiary. These types of assets typically avoid the probate process and pass directly to the named beneficiary.

Even the best plans can go astray if all the pieces of the puzzle are not pieced together correctly.

Distributions specified in wills can result in money going directly to a person with special needs. Payments made directly to a person with a disability can result in the reduction or even loss of government benefits.

  • How many caregivers of dependents with disabilities have named them as a beneficiary to a group or individual life insurance policy, IRA, 401(k) plan, profit sharing plan or defined benefit pension plan?
  • How many people have forgotten whom they named as  beneficiary?
  • How many people never named a beneficiary?

assetsWhen a caregiver dies, the terms of policies and retirement plans govern the distribution of the money – usually requiring distribution to the named beneficiary, or if no beneficiary is named or living, or to the estate. If the dependent with special needs receives the money, this could produce disastrous results.

When planning for the financial future of a person with special needs, all beneficiaries of insurance policies, pension plans, IRAs and annuities need to be reviewed.

If the caregiver has established a special needs trust for their dependent with special needs, the trust should be named as beneficiary, so not to compromise their loved one’s benefit eligibility. One mistake, a forgotten policy, or a beneficiary designation not updated can unravel the best plans.

Due to complex federal and state laws, you may require a trained professional to help plan for the future of your dependent.

A special needs planner works with your attorney and provides the financial and insurance solutions needed to complete planning.

For more information about this and other related topics, visit our organization’s website at or call 1-877-638-3375.

The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance or other financial products and services. Clients should seek advice based on their particular circumstances from an independent tax advisor since any discussion of taxes is for general informational purposes only and does not purport to be complete or cover every situation.

MetLife, its agents and representatives may not give legal, tax or accounting advice, and this document should not be construed as such. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
Metropolitan Life Insurance Company, 200 Park Avenue, New York, NY 10166.
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