This document discusses planning and financial strategies for families with a loved one who has a disability. It recommends establishing a special needs trust to provide lifetime care and maintain eligibility for public benefits. A special needs trust can be funded through gifts, assets on death, and life insurance proceeds paid directly to the trust. This ensures the disabled family member has resources for supplemental needs while preserving eligibility for Medicaid and SSI benefits.

1. OLA 1614 0513
Providing for the Future

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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.

3. Why Families Should Plan for a Loved
One with a Disability
• Persons with disabilities are living longer and public
benefits are often necessary to cover lifetime personal
and medical care needs
• Health care costs are increasing each year and paying for
such care can quickly zero out even a sizable inheritance
• 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 or guardians should appoint an Advocate for their
loved ones when they are no longer there
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4. Planning for a Loved One
with a Disability
• Preserving 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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5. Public Benefits at a Glance
• 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 held in the beneficiary’s name can
disqualify him or her from SSI and Medicaid
• Income over a modest amount (generally $1,000/month)
will reduce SSI and Medicaid benefits
• Laws and services vary from state to state
• Social Security Disability Insurance (SSDI) and Medicare
are not affected by a person’s assets or income
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6. What SSI Provides
• SSI provides a modest monthly cash grant for food and
shelter to disabled, blind, or aged (65 or older) persons
• In 2013, the SSI Federal Payment Standard is
$710 a month for an individual
• Some States supplement this amount. For example,
California provides a supplement of $156 a month to
the payment
• Eligibility for even $1 of SSI (in most States) means
automatic eligibility for Medicaid
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7. • 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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What Medicaid Provides*

8. Lifetime Care Planning for a
Child with a Disability
The 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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9. 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

10. 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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11. 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

12. 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
• Trust provisions need to preserve eligibility
of beneficiary for public benefits
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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
Types of Third-Party SNTs

14. • Cash
• Stock
• Personal property
• Real estate
• Life insurance
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Funding an SNT

15. 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
• Joint survivorship policy can be very cost-effective
funding tool

16. 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

17. 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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18. Example: The Smiths’ Planning
• The Smiths consult their financial advisor, insurance
professional, and attorney experienced in special
needs planning
• The Smiths’ financial advisor and insurance professional
• Examines the Smiths’ goals and objectives
• Performs detailed financial analysis based on future
cost of supplementary items
• Explores available resources to fund trust now
and in future
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19. The Smiths' create a Special Needs Trust
• Jim and Jane make annual gifts to the SNT
• The SNT purchases a $1.5M TransACE Survivor®
life insurance policy
• When Jim and Jane pass away, the SNT receives the
income tax-free life insurance proceeds
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Example: The Smiths’ Plan

20. Special Needs Trust –
The Smith Family
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How does it work?
Grantors
Jim & Jane
Disabled Loved One
Mike
SSI & Medicaid
Annual gifts
to Trust
Distributions
for care
Premiums paid
for policy on life
of grantor
At death,
proceeds paid
to the trust Eligibility for
government
benefits
maintained

21. • Only life insurance provides instant liquidity in event of Jim
and Jane's death for the continued care of Mike
• Death benefit is immediately available; avoids probate
• Distributions from the SNT can be made for Mike's care
without interfering with his eligibility for public benefits
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Example: Benefits

22. 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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23. TransACE Survivor®
is a nonparticipating, flexible premium universal life insurance policy issued by
Transamerica Life Insurance Company, Cedar Rapids, IA 52499. Policy form No. ICC12 UL06 or UL06
(CVAT). Policy form and number may vary and this policy may not be available in all jurisdictions. In
most states, in the event of suicide during the first two policy years, death benefits are limited only to
the return of premiums paid.
Transamerica Life Insurance Company (“Transamerica”) and its 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 May 2013 .
Life insurance products issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499.
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24. OLA 1614 0513
Providing for the Future