special needs planning

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

dgl@davidgledbetter.comdgl@davidgledbetter.comdgl@davidgledbetter.comdgl@davidgledbetter.comdgl@davidgledbetter.com