Financial Planning for Children With Special Needs Determining the Future of Your Child James J. Di Gesu, CPA, PFS, MBA July 2009

Our Discussion Today ● Who We Are ● Why Special Needs Planning is Important ● What Is Special Needs Planning? ● The Approach: How Do You Plan?

● Who We Are

● Why Special Needs Planning is Important

● What Is Special Needs Planning?

● The Approach: How Do You Plan?

Profile: Who We Are ● CPA and financial advisor for 23 years ● Serve high-net worth clients, corp exec, business owners, retirees and families of generational wealth ● Continue to meet the needs of these families as well as serving families with Special Needs children ● Sr. Manager with KPMG and Deloitte & Touche for 12 years

● CPA and financial advisor for 23 years

● Serve high-net worth clients, corp exec, business owners, retirees and families of generational wealth

● Continue to meet the needs of these families as well as serving families with Special Needs children

● Sr. Manager with KPMG and Deloitte & Touche for 12 years

My Special Girl - Andrea

My Special Girls Michela & Andrea

Special Needs in America Today 1 out of 9 under 18 get special ed Nearly 2 in 7 families have member with disability 21 million families have member with disability 5.5% have both adults and children with a disability 76% of the 4.3 million children with disabilities live at home.

1 out of 9 under 18 get special ed

Nearly 2 in 7 families have member with disability

21 million families have member with disability

5.5% have both adults and children with a disability

76% of the 4.3 million children with disabilities live at home.

Why Special Needs Planning is Important ● Ensure proper coordination of your financial and legal strategy to benefit you, your child and other family members ● Critical to integrate your assets with government benefits to maximize your child’s quality of life ● If and when you are no longer able to be the primary caregiver for your son or daughter, you will know that you established a plan to care for them

● Ensure proper coordination of your financial and legal strategy to benefit you, your child and other family members

● Critical to integrate your assets with government benefits to maximize your child’s quality of life

● If and when you are no longer able to be the primary caregiver for your son or daughter, you will know that you established a plan to care for them

Integrates traditional financial planning with the unique requirements of your special needs family ● Blending your needs with your child’s, plus an effective financial and legal strategy, and access to government benefits ● Can include Wills, Trusts, Guardianship, Education on Government Benefits ● Defines your vision for your loved one’s life What is Special Needs Planning?

Integrates traditional financial planning with the unique requirements of your special needs family

● Blending your needs with your child’s, plus an effective financial and legal strategy, and access to government benefits

● Can include Wills, Trusts, Guardianship, Education on Government Benefits

● Defines your vision for your loved one’s life

Core Values of Special Needs Planning ● Your Family & Support System ● Financial Planning ● Estate and Legal Matters ● State and Governmental Benefits ● Your Well Being – (i.e., Emotional and Spiritual)

● Your Family & Support System

● Financial Planning

● Estate and Legal Matters

● State and Governmental Benefits

● Your Well Being – (i.e., Emotional and Spiritual)

Have You … Yes or No ? Clearly defined personal and financial goals? Positioned assets for retirement? Established the future care of your special needs child? Prepared and executed Wills, and prepared a Personal Financial Plan? Created a Special Needs Trust? Thoroughly explored Government Benefits? Selected a Trustee(s) and Guardian? Completed a Letter of Intent? Communicated your plan to friends & family? Achieved Peace of Mind with your current plan?

Clearly defined personal and financial goals?

Positioned assets for retirement?

Established the future care of your special needs child?

Prepared and executed Wills, and prepared a Personal Financial Plan?

Created a Special Needs Trust?

Thoroughly explored Government Benefits?

Selected a Trustee(s) and Guardian?

Completed a Letter of Intent?

Communicated your plan to friends & family?

Achieved Peace of Mind with your current plan?

Reasons to Plan Increasing Population with Disability Increasing Demands for Services Increasing Life Expectancy Increasing Costs of Care Shrinking Government Resources

Increasing Population with Disability

Increasing Demands for Services

Increasing Life Expectancy

Increasing Costs of Care

Shrinking Government Resources

What if You Don’t Plan The state has their plan for you and your child. The state will choose who will care for your child. With no plan in place, the guardian and trustee will be unable to care for the financial and emotional needs of your child. The state decides how, when or if your assets are distributed. If your child holds assets in excess of $2,000, Government Benefits (SSI and Medicaid) could be lost or forfeited Due to lost Government Benefits your child’s standard of living could be reduced substantially.

The state has their plan for you and your child.

The state will choose who will care for your child.

With no plan in place, the guardian and trustee will be unable to care for the financial and emotional needs of your child.

The state decides how, when or if your assets are distributed.

If your child holds assets in excess of $2,000, Government Benefits (SSI and Medicaid) could be lost or forfeited

Due to lost Government Benefits your child’s standard of living could be reduced substantially.

What is Financial Planning I To develop and implement a family plan to achieve personal financial goals To accumulate and preserve wealth to meet the needs of you and your family Main Objective: To Achieve Financial Security for You, Your Child and Your Family

To develop and implement a family plan to achieve personal financial goals

To accumulate and preserve wealth to meet the needs of you and your family

Main Objective:

To Achieve Financial Security for You,

Your Child and Your Family

What is Financial Planning II Identify Personal Goals/Objectives Gather Personal Information And Documents Evaluate Goals And Identify Obstacles Develop Strategies And Recommendations Design And Implement Plan Review And Measure Results Revise Plan As Needed

Identify Personal Goals/Objectives

Gather Personal Information And Documents

Evaluate Goals And Identify Obstacles

Develop Strategies And Recommendations

Design And Implement Plan

Review And Measure Results

Revise Plan As Needed

Personal Financial Planning Cash and Debt Management Income Tax Planning Education Funding Strategies Retirement Planning Employee Benefit Plan Analysis Insurance and Risk Management Asset Allocation and Investment Management Estate Tax Planning and Strategies Business Succession Planning Special Needs Planning

Cash and Debt Management

Income Tax Planning

Education Funding Strategies

Retirement Planning

Employee Benefit Plan Analysis

Insurance and Risk Management

Asset Allocation and Investment Management

Estate Tax Planning and Strategies

Business Succession Planning

Special Needs Planning

Special Needs Planning Process Address Issues Identify Resources Estimate Costs Choose Professionals Create Plan Execute Legal Plan Prepare Letter of Intent Monitor and Update Plan

Address Issues

Identify Resources

Estimate Costs

Choose Professionals

Create Plan

Execute Legal Plan

Prepare Letter of Intent

Monitor and Update Plan

Traditional vs. Special Needs Traditional vs. Special Need Planning Wealth Distribution, Home Purchase, Investment Mgmt, College, Retirement General Personal Financial Planning Gifts, Inheritances, Transitional Plans, Lifetime Residential Needs, Trust Mngt Emergency Funds, Family Needs Cash & Debt Management Supplemental Expenses, Protection of Government Benefits Life, LT Disability, LT Care,Health, Home, Auto Insurance & Risk Management All Insurances,State Health Plans: Medicare and Medicaid Wills, Trusts, DPOA’s HCP,Living Wills Estate & Legal Planning Selecting Guardians,Trustees,Care Givers, SNTrust, LOI, Titling

Estate Planning Process ● Maximize Inheritance Designated to Heirs ● Minimize Estate Taxes and Expenses ● Review Testamentary Instruments, ● Beneficiary Designations and Other Documents ● Determine Guardianship of Children ● Distribute Assets to Beneficiaries ● Manage Estate Assets

● Maximize Inheritance Designated to Heirs

● Minimize Estate Taxes and Expenses

● Review Testamentary Instruments,

● Beneficiary Designations and Other Documents

● Determine Guardianship of Children

● Distribute Assets to Beneficiaries

● Manage Estate Assets

Why Everyone Needs a Will ● Avoid Intestacy ● Simultaneous Death ● Designate Executor(s) Trustee(s) ● Designate Guardian(s) for Minor Children ● Provisions for Minor(s) ● Specific Bequests ● Marital Assets

● Avoid Intestacy

● Simultaneous Death

● Designate Executor(s) Trustee(s)

● Designate Guardian(s) for Minor Children

● Provisions for Minor(s)

● Specific Bequests

● Marital Assets

The Elements of a Will Trusts for Individuals and Charity Who Will Serve as Executor , Trustee or Guardian? Plan For Estate Taxes Outright Distributions of Property WILL Elements of A Will

Estate Planning Options Distribute Assets to Sibling Gifts to the Special Needs Child Disinherit the Special Needs Child Establish a Special Needs Trust

Distribute Assets to Sibling

Gifts to the Special Needs Child

Disinherit the Special Needs Child

Establish a Special Needs Trust

What is a Trust? ● Minimize Estate Taxes ● Benefits Of Professional Asset Management ● Legacy For Favored Charities (with Tax Benefits) ● Provides For Your Retirement ● Manages Your Affairs If You Become Incapacitated ● Avoids Costs, Delays And Publicity Of Probate

● Minimize Estate Taxes

● Benefits Of Professional Asset Management

● Legacy For Favored Charities (with Tax Benefits)

● Provides For Your Retirement

● Manages Your Affairs If You Become Incapacitated

● Avoids Costs, Delays And Publicity Of Probate

Special Needs Trusts Definition: The SNT manages resources while maintaining the child’s eligibility for government benefits. There are two types of Special Needs Trusts: Support Trusts – Requires the Trustee to make distributions for the child’s support including food, shelter, clothing medical care and education. However, support trusts are not eligible to receive financial assistance through the Supplemental Security Income (SSI) or Medicaid. Special Needs Trusts (SNT) – These trusts are the most effective approach to assist a child with disabilities. Special Needs Trusts

Definition: The SNT manages resources while maintaining the child’s eligibility for government benefits. There are two types of Special Needs Trusts:

Support Trusts – Requires the Trustee to make distributions for the child’s support including food, shelter, clothing medical care and education. However, support trusts are not eligible to receive financial assistance through the Supplemental Security Income (SSI) or Medicaid.

Special Needs Trusts (SNT) – These trusts are the most effective approach to assist a child with disabilities.

Requirements for the SNT Trustee must be give absolute control over the distribution of the funds The child with special needs can not have the ability or authority to revoke the trust. If money is used in a trust for the wrong reason, it could become disqualified and place future benefits in jeopardy. The distribution rules of the trust and educating the trustee in the proper use of money is critical. Requirements of a SNT

Trustee must be give absolute control over the distribution of the funds

The child with special needs can not have the ability or authority to revoke the trust.

If money is used in a trust for the wrong reason, it could become disqualified and place future benefits in jeopardy.

The distribution rules of the trust and educating the trustee in the proper use of money is critical.

How much needs to be placed into the trust Estimate cost of child’s care over their life expectancy Value of the parents estate can be left to the trust If there are insufficient assets from the estate, the trust can be funded from proceeds of life insurance to meet shortfall Use of life insurance helps to meet life-long expenses Funding the SNT

How much needs to be placed into the trust

Estimate cost of child’s care over their life expectancy

Value of the parents estate can be left to the trust

If there are insufficient assets from the estate, the trust can be funded from proceeds of life insurance to meet shortfall

Use of life insurance helps to meet life-long expenses

Life Insurance Life Insurance Term Permanent or Whole Life Universal Variable Survivorship or Second-to-Die Other Insurance Property and Casualty – (Home, Auto, etc.) Personal Liability or Umbrella Disability Long-Term Care Health/Medical Insurance

Life Insurance

Term

Permanent or Whole Life

Universal

Variable

Survivorship or Second-to-Die

Other Insurance

Property and Casualty – (Home, Auto, etc.)

Personal Liability or Umbrella

Disability

Long-Term Care

Health/Medical

Income Tax Benefits ● Cash and Debt Management ● Review Monthly Living Expenses ● Determine Extraordinary Cash Expenses ● Create Emergency Reserve Fund ● Review and Maximize Use of Debt Cash Management

● Cash and Debt Management

● Review Monthly Living Expenses

● Determine Extraordinary Cash Expenses

● Create Emergency Reserve Fund

● Review and Maximize Use of Debt

Income Tax Benefits Personal Exemption Child and Dependent Care Credit Medical Expenses HSA’s and FSA’s Attending Disability/Medical Conferences Income Tax Benefits

Personal Exemption

Child and Dependent Care Credit

Medical Expenses

HSA’s and FSA’s

Attending Disability/Medical Conferences

Education Plans Savings Bonds Section 529 Education Plans Coverdell Education Savings Plans (CESA’s) Custodial Accounts - UTMA’s and UGMA’s IRA’s and Roth IRA’s Education Plans

Savings Bonds

Section 529 Education Plans

Coverdell Education Savings Plans (CESA’s)

Custodial Accounts - UTMA’s and UGMA’s

IRA’s and Roth IRA’s

Assemble Your Special Dream Team Family and Friends Doctors, Therapists and Other Medical Professionals Managed Care Giver(s) Guardian Trustee – (Family and/or Corporate) Attorney CPA Personal Financial Advisor Create Your Dream Team

Family and Friends

Doctors, Therapists and Other Medical Professionals

Managed Care Giver(s)

Guardian

Trustee – (Family and/or Corporate)

Attorney

CPA

Personal Financial Advisor

What is a Managed Care-Giver? The Special needs Trust can direct the trustee to hire a care manager. The Care Manager: Specializes in arrangements to provide for your special needs child with the level of care required. Social work background Selecting Managed Care-Givers

The Special needs Trust can direct the trustee to hire a care manager. The Care Manager:

Specializes in arrangements to provide for your special needs child with the level of care required.

Social work background

Selecting Guardians Guardian Critical for Child with SN’s Difficult Decision Parents Need to Decide Life-long Commitment of Caring Designate Guardian within Will Selecting Guardians

Guardian Critical for Child with SN’s

Difficult Decision

Parents Need to Decide

Life-long Commitment of Caring

Designate Guardian within Will

Selecting Guardians ● Has integrity and impartiality ● Acts in the best interest of the child ● Invests and allocates trust assets to prudent investments ● Distributes income and/or assets to the child ● Advocate for medical and financial entitlements ● Knowledge of accounting and tax-planning ● Recordkeeping and reporting ability ● Willingness to serve the duration of trust term ● Experience as a Trustee ● Has special sensitivity to a child with disabilities Selecting Trustees

● Has integrity and impartiality

● Acts in the best interest of the child

● Invests and allocates trust assets to prudent investments

● Distributes income and/or assets to the child

● Advocate for medical and financial entitlements

● Knowledge of accounting and tax-planning

● Recordkeeping and reporting ability

● Willingness to serve the duration of trust term

● Experience as a Trustee

● Has special sensitivity to a child with disabilities

Government Benefits Special Education Social Security Supplemental Security Income Medicare Medicaid Government Benefits

Special Education

Social Security

Supplemental Security Income

Medicare

Medicaid

Government Benefits Benefits NOT Based on Financial Needs: Social Security Medicare Special Education Benefits Based on Financial Needs: Supplemental Security Income (SSI) Housing Subsidies (HUD) Food Stamps In Home Support Services State Benefits Government Benefits

Benefits NOT Based on Financial Needs:

Social Security

Medicare

Special Education

Benefits Based on Financial Needs:

Supplemental Security Income (SSI)

Housing Subsidies (HUD)

Food Stamps

In Home Support Services

State Benefits

What is a Letter of Intent? Details of Biographical, Personal Information and Unique Personality Traits Personal Care, Diet, Habits & Daily Routines Family Details and Information Medical Care, History and Professionals Education, Schooling, Social and Recreational Details Parents and Child’s Financial Information List of Financial Advisors Estate and Legal Documents Current and Future Governmental Benefits Final Arrangements of Child Letter of Intent

Details of Biographical, Personal Information and Unique Personality Traits

Personal Care, Diet, Habits & Daily Routines

Family Details and Information

Medical Care, History and Professionals

Education, Schooling, Social and Recreational Details

Parents and Child’s Financial Information

List of Financial Advisors

Estate and Legal Documents

Current and Future Governmental Benefits

Final Arrangements of Child

Special Plan Summary Create the ‘Special’ Financial Plan Execute the ‘Special’ Estate Plan Select the ‘Special’ Dream Team Share your ‘Special’ Plan Be Sure to Take Care of ‘Special’ You Summary of Special Plan

Create the ‘Special’ Financial Plan

Execute the ‘Special’ Estate Plan

Select the ‘Special’ Dream Team

Share your ‘Special’ Plan

Be Sure to Take Care of ‘Special’ You

Selecting Guardians Currently Sr. VP with Wealth Health LLC – Personal Wealth Management firm, located in Roseland, NJ, www.wealthhealthllc.com My blog on planning for special needs: JDiGesu.com Phone at 973-535-9577 or 201-414-4002 Email: James@JDiGesu.com Email: [email_address] Contact

Currently Sr. VP with Wealth Health LLC – Personal Wealth Management firm, located in Roseland, NJ, www.wealthhealthllc.com

My blog on planning for special needs: JDiGesu.com

Phone at 973-535-9577 or 201-414-4002

Email: James@JDiGesu.com

Email: [email_address]