Financial planning for any family is complicated, but the challenges rise to a new level when a child has special needs.

“Parents are not only planning for their family’s needs and retirement, but for well beyond their lifetimes,” says Linda Hunter Suzman, a Special Care Planner with MassMutual Financial Group in Seattle.

The process, including buying life insurance policies, is fraught with legal considerations. Well-meaning parents who name children as beneficiaries on their policies put them at risk for losing eligibility for government assistance. Under federal law, anyone who receives a gift or inheritance of more than $2,000 is disqualified for benefits, such as Supplemental Security Income and Medicaid.

That’s why assembling a team of trusted financial advisers is critical, including an accountant, attorney and life insurance agent who specialize in helping families like yours.

Life insurance as financial safety net: set up a trust

An attorney can help you set up a special-needs trust — an important tool if you think your child will require government help. A special needs trust holds assets for your child, and can be named as a beneficiary for life insurance. A trustee, usually a family member, distributes money to take care of your child. When set up properly, a special -needs trust provides money to maintain your child’s quality of life and preserves eligibility for government benefits.

The trust shouldn’t be generic or inflexible, but designed specifically for your child, says Diedre Wachbrit Braverman, a special-needs estate attorney in Boulder, Colo.

Braverman, whose brother has severe autism, speaks from experience; she helped her parents set up a trust. She recommends working with a special-needs attorney — not just an estate attorney. The Academy of Special Needs Planners provides a search tool to find attorneys. She also recommends finding a knowledgeable life insurance agent.

Life insurance plays an important role because most families cannot save enough money for their children’s lifetime needs, and the coverage provides security in case a parent dies prematurely.

A growing number of life insurance companies have established units for special-needs planning. MassMutual started its SpecialCare program in 2004. The company worked with The American College in Bryn Mawr, Pa., to develop coursework and the Chartered Special Needs Consultant designation for agents who complete the schooling.

The training is open only to MassMutual agents, but will become available industry-wide in 2014, says Allen McLellan, associate dean and assistant professor of insurance at The American College.

“I predict there will be great demand for it,” he says. “Working with families in this situation takes deep and really broad knowledge. Most of the advisers who do well are driven, and the work is a calling.”

MetLife started its Center for Special Needs Planning 12 years ago upon the urging of an employee, a parent of special-needs children. The program provides training for agents and resources for families. More than 80 percent of the people who work in it have a family member with special needs, says Kelly Piacenti, director, and also a mother of four, including an 11-year-old boy with cerebral palsy.

Piacenti is not surprised at results from a recent MetLife survey that showed less than half, 49 percent, of caregivers have identified a guardian for their dependent should they no longer care for them. More than half, 56 percent, are unfamiliar with how to identify a trustee to watch over their dependent’s financial holdings, and another 55 percent aren’t sure how to set up a plan for lifetime financial assistance for their dependent.

Parents of special-needs children are so consumed with the day-to-day they have little time or energy to plan, she says. And questions about the future are scary.

“Who’s going to do this? Who’s going to take care of him when we’re not here?” says Piacenti, whose son requires intense medical attention. “This is what keeps us up at night.”

Tips for using life insurance to plan for the future of your special-needs child

Suzman understands the stress on families because she’s been there, too. Her son, now in college, was diagnosed on the autism spectrum. She recommends the following insurance tips:

Make sure you have enough individual disability insurance and long-term care insurance for yourself, so the family isn’t strained if you become disabled or need long-term care.
Invest in a whole life insurance policy to help finance your child’s lifetime needs. Permanent life insurance also provides cash value, which you can borrow against in emergencies.
Consider important riders, such as waiver of premium, which pays the premium if you become disabled; and a guaranteed insurability rider, which lets you purchase more life insurance later without undergoing a medical exam.
Finally, don’t procrastinate. Help is at hand, and financial planning doesn’t have to be expensive, Suzman says.

“But not planning, writing no wills and leaving guardianship up to the courts — that’s a parent’s worst nightmare.”