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This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Clients and other interested parties to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.

Why Families Should Plan for a Loved One with a Disability Persons with disabilities are living longer and public

benefits are often necessary to pay for future personal and medical care

Health care costs are increasing each year and private paying for such care can zero out even a sizable inheritance in a short period of time

Public benefits provide ONLY a subsistence level of care. To provide for “extras” such as transportation, accessibility modifications, or furniture for a person with a disability requires “special” planning

Parents should plan to appoint an Advocate after they are no longer there for their child with a disability

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Planning for a Child with a Disability

Preserving your child’s financial security and quality of life

Addressing key issues:

Understanding the role of public benefits

Making decisions about the future

Using a special needs trust to protect assets

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Public Benefits at a Glance

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Supplemental Security Income (SSI) and Medicaid are the two most common public benefit programs for persons with disabilities

SSI and Medicaid are means tested public benefits:

Assets over $2,000 in the person with a disability’s name disqualify him or her from SSI and Medicaid

Income over a modest amount (generally $940/month) will disqualify a person from SSI and Medicaid

Laws and services vary from state to state

Social Security Disability Insurance (SSDI) and Medicare are not affected by a person’s assets

What SSI Provides

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SSI provides a modest monthly cash grant for food andshelter to disabled, blind, or aged (65 or older) persons

In 2008, the SSI federal government maximum payment is $637 a month for an individual

Some States supplement this amount. For example, California provides a supplement of $233 a month to the payment

Eligibility for even $1 of SSI (in most States) means automatic eligibility for Medicaid

What Medicaid Provides*

Comprehensive health insurance

Attendant services

Dental coverage

Day rehabilitation programs

Group homes

*Programs are state-specific; please contact your state Medicaid provider for more details.

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Lifetime Care Planning for a Child with a DisabilityThe best planning will assemble a team consisting of a special needs planning attorney, financial advisor, insurance professional, and professional care giver to develop a plan for lifetime care

Understand costs associated with specific disability

Understand availability of public benefits

Develop plan for funding the lifetime care

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What Parents Should Do

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Create Letter of Intent

Calculate future financial need

Establish Special Needs Trust (SNT) through will or living trust

Fund SNT with life insurance

Name SNT as beneficiary of accounts, plans, etc.

Reduce taxable estate

Estimate Income and Expenses

Monthly income

SSI, SSDI, Social Security, earned/unearned income

Monthly living expenses

Housing, food, transportation, medical, recreation, etc.

Consider how any shortfall will be met

Income – Expenses = Shortfall

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Establish a SNT

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Third-Party SNTs allows a person with a disability to have assets available for their future care without interfering with public benefits eligibility

May be established by parents:

Through will

Through living trust

How to Establish an SNT

Important to work with experienced special needs planning attorney to establish an SNT

Complex laws govern trusts

Laws vary from state to state

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Types of Third-Party SNTs

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There are two primary types of SNTs – Individual and Pooled

Individual SNTs are held by a corporate trustee or private trustee

Pooled SNTs are held by a Nonprofit Organization

Funding an SNT

Cash

Stock

Personal property

Real estate

Life insurance

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Life Insurance

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Ideal way to provide for special needs child or dependent adult because death benefit is:

Federal income tax–free

Immediately available

Usually received outside of the probate process

Avoiding Common Mistakes

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Common mistakes families make when planning for a person with a disability

Failing to plan at all

Creating a trust for person with a disability that fails to qualify as a special needs trust

Placing money in Uniform Transfer to Minors Account (UTMA)

Assuming other family members will take care of person

with disability

Picking a poor trustee

Example: The Smith Family

Jim and Jane Smith are both 54

13-year-old son, Mike, has Down syndrome

Jim and Jane want to ensure that Mike continues to receive government services while his supplemental needs are also covered

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Example: The Smiths’ Plan

The Smiths consult their financial advisor, insurance professional, and attorney experienced in special needs planning

Jim and Jane create an SNT

18 For producer use only. Not for presentation to the public.

Example: The Smiths’ Planning Considerations

The Smiths’ financial advisor and insurance professional

Examine the Smiths’ goals and objectives

Perform detailed financial analysis based on future cost of supplementary items

Explore available resources to fund trust now and in future

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Example: The Smiths’ SNT

One option: fund trust with life insurance

Only life insurance provides instant liquidity in event of caregiver’s death

Death benefit is immediately available; avoids probate

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Remembering Other Family Members

Don’t forget other family members who may share in care of disabled person

Siblings should be considered in parents’ overall estate planning

Relative acting as trustee should be compensated bytrust for duties performed

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Achieving Important Goals

An SNT can help you achieve vital estate planning and financial goals for your disabled loved one

Proper planning allows disabled person to maintain and enjoy a comfortable lifestyle while preserving governmental program eligibility

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Life insurance products issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499, or Transamerica Financial Life Insurance Company, Purchase, NY 10577. All products may not be available in all jurisdictions. Transamerica Financial Life Insurance Company is authorized to conduct business in New York. Transamerica Life Insurance Company is licensed to conduct business in all other states.

Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”) and their representatives do not give tax or legal advice. This material is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here.

Discussions of the various planning strategies and issues are based on our understanding

of the applicable federal laws in effect at the time of publication. However, these laws are subject to interpretation and change, and there is no guarantee that the relevant authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects.

Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of December 2008.

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OLA 1614 1208

Providingfor the Future