special needs planning
DESCRIPTION
Special Needs Planning Workshop PresentationTRANSCRIPT
Special Needs PlanningFirst Thursday WorkshopFirst Thursday Workshop
April 2, 2009
The Need
• 51.2 million with disabilities
• 13-16% families children with special needs
• (2002 census)
• Autism — 1 in 150 births; 1-1.5 million
• (Autism Society of America)
Support Programs
• Entitlement programs
• Social Security
• Medicare
• Means-tested programs
• SSI (Supplemental Security Income)
• Medicaid
Challenges
• Provide for all of family without jeopardizing special needs beneficiary’s eligibility
• Supplement government benefits and enhance quality of life for special needs beneficiary
• Treat family equitably
Challenges
• Ensure sufficient funds are available to continue care of special needs beneficiary after death of parent(s)
• Provide proper supervision and management of assets for special needs beneficiary
Mistakes• Direct distribution
• Disinheriting
• Relying on other family members
• Failing to protect privacy and dignity of special needs child
• Choosing the wrong professional advisor for help
Direct Distribution
• Entitlement programs very limited
• Needs-based programs
• Direct distribution leaves beneficiary ineligible
• Inheritance must be spent down before re-qualifying
Disinheriting
• Attempt to protect government benefits
• Government benefits provide minimal levels of support
• Special needs child relies on parents more than the other kids do
• Short-sighted planning
Relying On Others
• May be temporary help, but many long-term drawbacks
• May not have the financial resources
• May not have emotional resources
• Risk of that person’s divorce, creditor problems, incapacity, or death
Privacy and Dignity
• Unnecessary exposure of affairs in public forum (Probate Court)
• Predators may learn of special needs beneficiary’s assets, disabilities
• Relying on government assistance alone provides only very basic support
• Fails to protect the dignity of the beneficiary
Choosing Wrong Professional
• Advisors not experienced in this area can do more harm than good
• Experienced advisors can help maximize resources available
• Team approach critical
Key Support Team Members
• Advisor who identifies the need
• Litigation attorney, if relevant
• Special needs planning attorney
• Financial advisor
• Tax accountant
Key Tools
• General Durable Power of Attorney with appropriate special needs provisions
• Durable Healthcare Power of Attorney
• HIPAA Authorization
• Revocable Living Trust with appropriate special needs provisions
• Detailed letter of intent
• Special Needs Trust (state specific)
Special Needs Trust
• Discretionary
• Supplemental
• Litigation related
Special Needs Trust
• Self-settled [(d)(4)(A) trust/Medicaid Payback Trust]
• Pooled account [(d)(4)(C) trust]
• Third party-settled
Uses of SNT Funds
• Special medical needs
• Clothing
• Entertainment
• Personal grooming
• Etc.
Key SNT Players
• Advisory Board
• Advocate
• Trustee
Advisory Board
• 3-12 people
• Formal board with informal powers
• Advise trustee
• Keeps key extended family members involved
Advocate
• Family member or professional
• Ensures quality of care is acceptable
• Makes recommendations regarding living arrangements and therapeutic regimens
Trustee
• Controls all the assets in the SNT
• Bank, professional, family member, friend
• Critical that qualified person is named
• Others can be advisors
Trustee• Professional trustee often the solution
• Acting alone or as co-trustee
• Family members usually focused on care, not finances
• Assets under management may be significant
• Assets must last for lifetime care of beneficiary
Taxation
• Distributions taxable to the beneficiary
• Retained earnings taxable to the trust
• Accountant key member of the team
Funding
• How much is enough?
• SNTs typically funded with as much as $2M
• Source?
• Savings, financial planning
• Life insurance
Insurance
• Term insurance not the solution
• Need for insurance does not end
• Permanent policies ensure the trust funding regardless of how long the insured lives
• Survivorship policies particularly popular
• Tremendous opportunities for the planner
Team Approach
• Extended family—after parents gone
• Care
• Supervision
• Advocacy
• Coordination of efforts, support
Team Approach
• Professional Advisors
• Attorney
• Financial Advisor
• Life Insurance Advisor
• Accountant
• Bank/Trust Department
• Coordination of efforts is critical
Law Offices of David G. Ledbetter1695 Service Road NE
Grand Rapids, Michigan 49503(616) 459-3333