Financial Planning for Children with Special Needs
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Financial Planning for Children with Special Needs

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  • A Discretionary Special Needs Trust is established by a qualified attorney. The trust is drafted specifically so that it does not violate and Medicaid rules, and allows the funds to be used as a supplement to, and not a replacement for any public benefits. The language of the trust is very clear that the funds are not to be used for the beneficiary’s basic support, and health needs, but rather as a supplement to those benefits being received by the beneficiary
  • Protects any assets you leave your child/dependant, so that they can be used to enhance quality of life Helps maintain an individual’s eligibility for a group home, or can be used to purchase and maintain a home for the child/dependant Protects the child from themselves and others. They will not have the ability to misuse the assets, or become easy targets financially Provides protected money to pay for services that Medicaid does not cover, such as home care, wheelchairs, handicap accessible vans, mechanical beds, etc.
  • Good heart, and understanding of your child/dependant and their needs Shares your values Shares your views of appropriate ways to spend money Good with money, knows what types of advisors to hire to help them invest, and knows when to hire professional help Strong backbone, can handle and defend potential challenges, and be an advocate for services for the beneficiary Organized in their thinking and actions, and can monitor services provided to the beneficiary A Trustee who will follow your wishes as outlined in your Letter of Intent You do not have to have one person shoulder the responsibility alone. It can be more than one person, it can be an individual with a corporate trustee, or it can be a corporate trustee alone
  • Special Needs Provisions are specific legal trust provisions for the benefit of a child or adult with a disability The language very specifically states that the assets of the trust are to be used as a supplement to, and not a replacement for the needs based public benefits the disabled beneficiary is receiving, or may receive in the future
  • Special Needs Trust Provisions can be placed either inside your Last Will and Testament, or in its own separate Special Needs Trust Special Needs Trusts, which are established by a 3 rd party which are irrevocable are governed by 42 U.S.C. Section 1396p(d)(3)(B), are not considered an available resource for Medicaid Special Needs Trusts which are revocable trusts created by the disabled beneficiary , are governed by 42 U.S.C. section 1396p(d)(3)(A), and are treated as available assets for Medicaid The determination of where to use the Special Needs Trust Provisions is based on when you will put money into it, and the issues in your estate
  • An experienced Estate Planning attorney who routinely prepares Special Needs documents The attorney will assist you in determining whether the Special Needs provisions will be in your Last Will and Testament, in a separate Special Needs Trust, or both The documents must be prepared very specifically to avoid challenges by governmental, or state agencies
  • Your child/dependent needs proper Guardians appointed as well as proper Special Needs Provisions Often it is the cost of preparing a Last Will and Testament, which you need anyway If a separate trust is needed, there will be an extra cost and that varies from attorney to attorney Must be a qualified attorney who has experience in drafting Special Needs Language Sitting down with a good financial advisor and attorney at the same time, helps keep everyone on the same page, and can reduce legal fees
  • What is the care for your child/dependent costing now per year? What expected costs will occur in the future based on what you know now? If your child/dependent is currently receiving benefits, how much are you supplementing that amount? Will your child/dependent be living on their own in the future? Will they need an aide? What is your child/dependent’s life expectancy? Remember, as we know, unexpected developments can occur resulting in additional therapies, aides, etc. If possible obtain a Life Care Plan from a professional Life Care Planner. This is to estimate the cost of the child/dependant’s care over a typical lifetime specifically taking into account their medical condition, and needs. Normally a person is certified to assist in preparing a Life Care Plan, and typically it is someone in the Medical Profession.
  • If you have a significant amount of wealth, you can gift monies into a Special Needs Trust today, and fund it with assets you already have If you have wealth, you may choose to leverage it with life insurance to fund the Special Needs Trust If you do not have money to fund the trust, and you do not know whether you will have money in the future, life insurance is a good alternative. Life Insurance can be the most cost effective way to leverage your assets
  • Review all Parent’s and Grandparent’s assets Make sure that the Special Needs beneficiary does not receive any funds outright. Check your IRA, 401k, Annuities, and Life Insurance beneficiary designations. Also no personal effects outright such as jewelry, household items, etc., as they would be seized and liquidated Not every asset is an appropriate one to fund a Special Needs Trust. For example, Annuities, and Retirement Assets would not be the first choice for these trusts. Trusts are non natural owners and therefore you lose many tax advantages of annuities. In addition, retirement assets, if left in a special needs trust for a beneficiary would still need to be distributed annually based on that beneficiaries life expectancy. Therefore retirement monies would be forced out of the trust on an annual basis, which would defeat the purpose of the discretionary special needs trust, and may cause the beneficiary to lose their publically funded benefits Check with Grandparents and relatives. Make sure your child is not an outright beneficiary of their assets, and instruct them that if they wish to leave funds to your child, to do so through your Special Needs Trust
  • Pro’s No need to create wealth, you already have it No additional costs to fund the special needs trust provision Con’s If you gift money today, you lose the ability to use it for yourself later…for your own medical needs, retirement,other children’s education, etc. What if you plan on leaving money to your child/dependent in your Will, and there is no money left, or not enough money left to help support them?
  • Pro’s Leverages your wealth Very cost effective use of dollars Creditor Protected Life Insurance is an asset Tax advantaged gifts of premiums-no gift tax because utilize Annual Gift Tax Exclusion, which is $13,000, per gift, per individual for 2009. Simply put, a person can gift up to the sum of $13,000, per person, to as many people as they wish without paying any gift tax, and there is no requirement to report the gifts Income and Estate tax free death benefit Growth of cash value on tax deferred basis Can also provide $ to help family distribute the estate between your child with special needs and any other children you may have Con’s Need to commit to pay premiums
  • Unfortunately, we never know how much time we have Confidence knowing that if something happens to you, your plan for you child/dependent is taken care of Everyone needs a Will, otherwise the state in which you live determines who gets your property and how Wills are needed to name proper Guardians for any minor, or disabled beneficiary Make sure your child/dependant is going to be able to continue to participate in activities that will enrich the child/dependant’s life
  • Lawsuit proceeds, gifts, inheritances, etc. You can establish a Self-Settled Special Needs Trust with your child’s own funds that will benefit them during their lifetime. Upon the child’s death, the monies remaining will first be used to payback Medicaid any costs expended for your child. The balance will go to your child’s other named beneficiaries including siblings. Commonly known as a “Medicaid Payback Trust” under 42 U.S.C. 1396p(d)(4).
  • A trust established by a nonprofit charitable organization for the disabled beneficiaries regardless of age, which beneficiary can add their own assets to, 42 U.S.C. 1396p(d)(4)(C). A beneficiary who is 65 or older must have a formal finding of disability under Social Security to qualify A separate account is maintained for each beneficiary, but for purposes of investment and management, the funds are pooled together Useful when beneficiary has resources that would disqualify him or her from receiving public benefits Upon the child’s death, or at the end of a court order, the remaining funds will go in one of two ways. If it is going to remain in the pooled non-profit trust, there is no Medicaid payback. If it goes upon death, to other beneficiaries, then Medicaid gets reimbursed first, and then the remaining amounts will go to the other beneficiaries. Section 1414 of ACT 42 of 2005, states that no more than 50% of the assets of remaining in the beneficiary’s pooled trust account may be retained without any obligation to reimburse Medicaid Best suited where the amount of non-exempt assets used to fund the trust are not large enough to justify the cost of establishing or administering a private Medicaid Payback Trust
  • A Charitable trust can be set up to benefit the child’s Special Needs Trust during his or her lifetime with the remainder going to charity upon their death. Rev. Ruling 2002-20. An income tax deduction and gift and estate tax deduction is allowed for the value of the charities remainder interest The Charitable Remainder Trust pays a stream of income into the Special Needs Trust throughout the beneficiary’s lifetime, and then the balance goes to charity. There is no Medicaid Payback Normally the trust term is limited to 20 years, however, if it is a qualifying Special Needs Trust it can last the duration of the beneficiary’s lifetime Leave a legacy to charity
  • Many families wish to show their gratitude to charities that have helped their children-hospitals, research facilities, colleges, libraries… Gifts can be made to charities directly, or within your Last Will and Testament Often people make a charity the beneficiary of a life insurance policy, or give money to the charity so the charity can purchase life insurance and benefit from it The financial benefits of making gifts to charity are income and estate tax deductions You can direct how the charitable gift is to be used, and even establish a specific scholarship/fund in the name of your family/child
  • Financial Planning in the event you are no longer here Financial Planning to help you reach all of your families goals, for your special needs child, other children’s educations, your retirement goals, etc. Getting the right attorney Work with advisors that have a good relationship with each other, and the internal resources to fully address your families concerns and needs.
  • Simply a plan for the special needs beneficiary’s life. Included is food, shelter, clothing, health, finances, family life, employment, entertainment It is to be prepared for today, and for the future To provide the best quality of life in every area-housing, employment, care options Specialists assist families with the Life Care Plan Strategies that focus on seizing opportunities and leveraging funds System of accountability of trustees Do not depend on other family members to take care of your child Helps address savings goals as well
  • Document that is NOT legally binding, but provides direction for the person(s) who will care for your child in the event both parents die prematurely The Letter details the disabled beneficiary’s medical condition, history, medications, doctors, therapists, daily care needs and routines, social needs, emotional well being, housing, services, as well as your specific wishes as it relates to the child’s future Think of what a day in your child’s life consists of and instructions on how to continue the same quality of life
  • Early intervention provides support for babies 0-3 years of age. The program evaluates and provides occupational therapy, speech therapy, physiotherapy, and more The Intermediate Unit takes over from 3-5 years old and transitions the child to school IDEA -requires that all children 3-21 receive free appropriate public education, as close to home as possible. Supplemental services are to be provided to assist a child in completing their education. An assessment process to determine a child’s needs IEP -a written statement about the child’s impairments, abilities and challenges that is required by the IDEA. Children are evaluated by the school district, yourself and educational professionals to determines your child’s special needs. This is an annual process. The Early Intervention Services and Intermediate Unit services as well as the IDEA and IEP are provided by state funding.
  • Set a meeting with your financial professional to review your financial goals, and to assist you in determining what monies are needed to fund the Special Needs Trust. Do not wait until you get organized to do this, a good financial professional will help you get organized If possible, have an estate planning attorney that is very experienced in drafting Special Needs documents attend the meeting with the Financial Advisor. This really helps everyone to be on the same page, and move things forward. If it is not initially possible, make sure the financial advisor and attorney are communicating with one another

Financial Planning for Children with Special Needs Financial Planning for Children with Special Needs Presentation Transcript

  • SPECIAL NEEDS PLANNING
    • A presentation for parents and caregivers of children and adults with special needs
    [email_address]
  • SPECIAL NEEDS PLANNING
    • Prepared by Randy Hope Steen, Esquire
    • The Law Office of Randy Hope Steen
    • 403 S. Bonsall Road
    • Coatesville, PA 19320
    • T 215.570.0047
    • [email_address]
    • www.rsteenlaw.com
    [email_address]
  • What is Special Needs Planning?
    • A discretionary trust created for a disabled individual as a way to supplement the person’s public benefits. The trust specifically provides funds in addition to the child’s public benefits to enhance the quality of the child’s life
    • Public Benefits may include SSI, Medicaid, Section 8 Housing, and other federal or state sponsored assistance programs based on financial need
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  • Potential Advantages of a Special Needs Trust
    • Protects assets
    • Maintain a home
    • Protects the disabled beneficiary
    • Covers additional services/therapies/equipment
    [email_address]
  • A Special Needs Trust Can Help Pay For…
    • Personal attendant
    • Medical goods
    • Dental care
    • Surgery or medical procedures
    • Private rehabilitation
    • Psychological support
    • Home modifications
    • Stamps and writing supplies
    • Drug and alcohol treatment
    • Recreational/cultural experiences
    • Additional therapies/activities
    • Enrich quality of life
    [email_address]
  • What are 2 Basic Requirements of Special Needs Trusts
    • Trustee has total control over the monies inside the Trust
    • The child/dependent can have no power, authority or control over the Trust
    [email_address]
  • Who would be the Trustee?
    • Depends on the specific issues in the situation/estate
    • A trusted family member(s), friend(s), a corporate fiduciary, bank, trust company, or a combination of an individual, and corporate fiduciary serving together
    [email_address]
  • What qualities are important in a Trustee?
    • Good heart
    • Shared values
    • Financially savvy
    • Advocate
    • Resolved
    • Organized
    • A Trustee who will follow your wishes as outlined in your Letter of Intent
    • You do not have to have one person shoulder the responsibility alone.
    [email_address]
  • WHAT ARE SPECIAL NEEDS PROVISIONS?
    • Specific legal trust provisions which state that the assets of the trust are to be used as a supplement to, and not a replacement for the needs based public benefits a beneficiary is receiving
    [email_address]
  • Where do I put these Special Needs Provisions?
    • Last Will and Testament, or in a separate Special Needs Trust
    • 3 rd party Special Needs Trusts, are not considered an available resource for Medicaid, governed by 42 U.S.C Section 1396p(d)(3)(B)
    • Special Needs Trusts created by the disabled beneficiary , are treated as available assets for Medicaid payback, governed by 42 U.S.C. Section 1396p(d)(3)(A)
    • All issues in estate determine placement
    [email_address]
  • Who Prepares The Special Needs Trust Provisions?
    • Attorney who routinely prepares Special Needs documents
    • Placement of Special Needs provisions
    • Flexibility in document provisions
    [email_address]
  • Is it expensive?
    • This is critical planning that should be considered!
    • Cost of preparing a Last Will and Testament, which you need anyway
    • Cost of a separate trust varies from attorney to attorney
    • Must be Attorney experienced in drafting Special Needs Language
    • Team Approach from your Advisors
    [email_address]
  • How to determine how much is needed to fund a Special Needs Trust?
    • Current cost of care
    • Future Costs/Life Expectancy
    • Benefits
    • Home
    • The unknown
    • Life Care Plan
    [email_address]
  • How much is needed to fund a Special Needs Trust?
    • What are the basic housing costs?
    • Custodial care? Nursing services?
    • Personal Needs?
    • Transportation costs?
    • Clothing?
    • Job Coaching?
    • Entertainment?
    • Prescription Drugs? Over the counter drugs?
    • Meals?
    • Additional Education?
    • Tuition? Books?
    • Special Equipment?
    • Service Animals?
    • Therapies?
    [email_address]
  • Where do I get the money to fund the Special Needs Trust?
    • Gift existing assets
    • Leveraging wealth
    [email_address]
  • Examine Finances
    • Review all Parent’s and Grandparent’s assets
    • No funds outright from anyone
    • Check beneficiary designations
    • Choose the right assets for the trust
    [email_address]
  • What are the pros and cons of funding the trust with assets I have?
    • Pro’s
    • Wealth exists
    • No funding costs
    • Con’s
    • Lose control of assets
    • No money left
    [email_address]
  • What are the pros and cons of purchasing life insurance?
    • Pro’s
    • Leverage wealth
    • Cost effective
    • Generally Creditor Protected
    • Asset
    • Gifts of premiums using Annual Gift Tax Exclusion
    • Income and Estate tax free death benefit
    • Tax deferred basis on growth
    • Estate equalization
    • Con’s
    • Pay premiums
    [email_address]
  • The importance of planning today
    • TAKE CARE OF IT NOW!
    • Life is unpredictable
    • Peace of Mind
    • Everyone needs a Will
    • Appointing Guardians
    • Quality of life
    • Enrichment of life
    [email_address]
  • WHAT IF YOUR CHILD HAS ASSETS OF THEIR OWN?
    • Lawsuit proceeds, gifts, inheritances, etc.
    • Self-Settled Special Needs Trusts
    • Medicaid Payback
    [email_address]
  • SPECIAL NEEDS POOLED TRUST ACCOUNTS
    • Established by a nonprofit charitable organization for the disabled beneficiaries regardless of age
    • Beneficiary can add their own assets
    • Beneficiary who is 65 or older must have a formal finding of disability under Social Security to qualify
    • Funds are pooled together
    • When used?
    • Medicaid payback
    [email_address]
  • CHARITIES AND SPECIAL NEEDS PLANNING
    • Charitable Trusts and tax deductions
    • How it works
    • No Medicaid Payback
    • For the beneficiary’s lifetime
    • Leave a legacy
    [email_address]
  • Leave a Legacy-Giving Back to Charity
    • Give back to charities
    • How gifts can be made
    • Life Insurance
    • Income and estate tax deductions
    • Scholarship Funds
    • Endowments
    [email_address]
  • Other Things To Think About…
    • Life Care Plan
    • Letter of Intent
    • Early Intervention, and the Intermediate Unit
    • IDEA-Individuals with Disabilities Education Act
    • IEP-Individualized Education program
    • Financial Planning
    • All financial goals
    • Getting the right attorney
    • Team Approach
    [email_address]
  • What is a Life Care Plan?
    • A plan for the special needs beneficiary’s life
    • Quality of life
    • Seizing opportunities and leveraging funds
    • System of accountability of trustees
    • Do not depend on other family members to take care of your child
    • Addresses savings goals
    • Life Care Planners and Special Needs Planning Attorney’s assist and guide you in preparing this
    [email_address]
  • What is a Letter of Intent?
    • NOT legally binding
    • Provides direction
    • Provides specific wishes
    • Details medical condition, history, medications, doctors, therapists, daily care needs and routines, social needs, emotional well being, housing, services, etc.
    • Snapshot of a day
    • Normally drafted with the assistance of Attorney and/or Life Care Planner
    [email_address]
  • HELP…
    • Early intervention 0-3yrs
    • The Intermediate Unit 3-5 yrs
    • IDEA -requires that all children 3-21 receive free appropriate public education, as close to home as possible. Supplemental services are to be provided to assist a child in completing their education. An assessment process to determine a child’s needs
    • IEP -a written statement about the child’s impairments, abilities and challenges that is required by the IDEA. Children are evaluated by the school district, yourself and educational professionals to determines your child’s special needs. This is an annual process
    [email_address]
  • WHAT SHOULD I DO NEXT?
    • Meet with Financial Professional . Do not wait until you get organized to do this, a good financial professional will help you get organized
    • Retain an attorney experienced in drafting Special Needs documents
    • Team Approach
    • Do not put off getting your planning in order, none of us know what the future holds
    [email_address]
  • If You Have Additional or Confidential Questions… The Law Office of Randy Hope Steen 403 S. Bonsall Road Coatesville, PA 19320 T 215.570.0047 Fax 610.857.1550 [email_address] www.rsteenlaw.com [email_address]