Planning for Families with Special Needs

Planning for Families with Special Needs Agenda ‣ Importance of Financial Planning for Families with Special Needs ‣ Special Needs Trusts (SNT) ‣ S...
Author: Abraham Dawson
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Planning for Families with Special Needs

Agenda

‣ Importance of Financial Planning for Families with Special Needs ‣ Special Needs Trusts (SNT) ‣ Special Needs Planning: Coordinating Trusts and Public Benefits ‣ Special Needs Trustees ‣ Special Needs Trust Administration ‣ Conclusion

Importance of Financial Planning for Families with Special Needs

Statistics: A Reality Check o 1 in 26 American families report raising a child with a disability1 o 1 out of 9 children less than 18 years of age receive special education services1 o 1 in 691 babies in the Unites States is born with Down Syndrome2 o Approximately 400,000 people in the U.S. have Down Syndrome o Over 75% of special needs adults are without employment1 o An estimated 10 million baby boomers will develop Alzheimer’s3 o Of those who reach the age of 85, nearly one in two will get it

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Source: CDC.gov/ncbdd/autism/data.html Source: “Myths & Truths: National Down Syndrome Society, last modified 2012 3 Source “Generation Alzheimer’s: The Defining Disease of the Baby Boomers” Alzheimer’s Association, last modified 2011 2

Have You Secured Your Child’s Future? Among parents of children with special needs: o 61% worry about ability of special needs child to be financially independent o 62% do not have a last will & testament o 49% have not identified a guardian o 88% have not set up a trust to preserve future governmental benefits o 84% have not written a letter of intention regarding the future care of their special needs family member

Source: “2005 The Torn Security Blanket: Children with Special Needs and the Planning Gap” and updated with 2011 Torn Security Blanket Study 5

Lack of Special Needs Planning - Impact Not properly planning may impact: o Government benefits o Quality of life o Other family members/family goals

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Special Needs Trust (SNT)

Special Needs Trust o A mechanism for protecting resources for individuals with disabilities without sacrificing their government entitlements o Must be in writing o Must be irrevocable o Distributions are discretionary and made by Trustee

Who Needs a Special Needs Trust? o Individuals who are disabled and need governmental benefits o Family members of a disabled person who need to maintain eligibility of current or future governmental benefits

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Types of Trusts o First Party or Self-Settled Special Needs Trust o Third Party Supplemental Needs Trust o Pooled Trust

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Self-Settled Special Needs Trusts o The disabled person’s assets are used to fund this trust o Personal injury settlements/lawsuit proceeds o Inheritance o Gift o Matrimonial settlements o Disabled person can be the only beneficiary o Must be irrevocable o Disabled person must be less than 65 years of age when trust is created o At death of beneficiary/disabled, assets in trust must be used to pay back any state Medicaid agency that provided benefits o Authorized by Federal Statute 42 U.S.C Section 1396 o Also commonly called (d)(4)(A) Trusts

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Third Party Special Needs Trusts o Established by someone other than the disabled individual o Parent o Grandparent o Assets of the third party are used to fund the trust o Disabled person is the beneficiary o Assets must not be available to beneficiary o No Medicare/Medicaid payback provisions at the death of beneficiary o Distributions should be made directly to providers of services for the beneficiary o Also known as a Supplemental Needs Trust

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Pooled Trust o Created and managed by non-profit association o Separate accounts must be maintained for each disabled beneficiary, but funds may be “pooled” for investment and administrative purposes o Sub account within a Pooled Trust may be established by a 3rd party, the disabled individual or their guardian, or by a court o Account must be maintained for the sole benefit of the individual with disability o Requires that amounts remaining in the account following the beneficiary’s death (which are not retained by the trust) be paid back to any state that provided medical assistance to the beneficiary • Note: Some states do not require payback and no payback is required when Trust is established by a 3rd party

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Special Needs Planning: Coordinating Trusts and Public Benefits

Special Needs Planning o Growing area of the law o Combines lifetime financial planning and estate planning o Planner must be familiar with common disabilities as well as various public benefits, both means tested and nonmeans tested, that are available

Create a Life Care Plan o Written document that begins with a current assessment of the disabled person o Projects the person’s medical and non-medical needs throughout life expectancy o Considers the full aspect/requirements of care o Medical and psychological needs o Educational and vocational needs o Equipment needs o Care giver needs o Housing needs o Should be updated periodically and any time a significant life change happens

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Planning for Persons with Disabilities o See an attorney who specializes in Special Needs Planning o Examine current/future needs and understand costs o Explore available benefits o Anticipate income or resources o Begin planning early

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Estate Planning for Parents o Execute a last will & testament o Name a guardian for the disabled family member o Other Estate Planning Documents o Trust Agreement o Health Care Power of Attorney o Financial Power of Attorney o Special Estate Planning Documents o Special Needs Trusts o Review Funding Sources (e.g., life insurance) o Review Beneficiary Designations o Retirement Accounts o Life Insurance o Payable on Death Accounts

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Special Considerations Other family members who may leave a bequest or gift to the disabled family member should be aware of the special needs planning being undertaken.

Public Benefit Programs Public Benefit Programs are available to persons with disabilities: o Social Security Income (SSI) o Medicaid o Medicaid Waiver Programs o Social Security Disability o Medicare o Federal Assisted Housing o Food Stamps Important Distinction! Some of these benefits are means-tested programs, and some are insurance programs. Only means-tested programs look at a person’s income and assets for eligibility.

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SNTs Supplement NOT Supplant Government Benefits

SUPPLEMENTING o Medical needs not covered by Medicaid o Social Needs o Recreational Needs

SUPPLANTING o Food o Shelter o Medical items or services paid by Medicaid

o Educational Expenses

Important Distinction! Loss of government benefits is a risk if distributions are not made for proper purposes.

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Special Needs Trustees

The Trustee o Key to success of Special Needs Trust Administration o Ability to assess requests and make distributions while protecting public benefits o Financial duties o Administrative duties o Personal needs and advocacy o Accountability o Trust Protector

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The Perfect Special Needs Trustee Is… o A medical expert o A legal expert

Special Considerations

o A public benefits expert o An investment wizard o A social worker o Immortal

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The duties of a Special Needs Trustee extend far beyond the typical responsibilities of a traditional trustee.

Common Roles of a Trustee o Selecting and overseeing caregivers o Covering emergencies o Securing services and equipment o Communicating with caregivers and beneficiaries o Reviewing and adhering to life care plan o Protecting from predators, creditors, and family (parental invasion)

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Special Needs Trust Administration

Goals The goals of every Special Needs Trust are to …. o Maintain or improve the standard of living and quality of life for the beneficiary o Maintain eligibility for all government benefits

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Benefit Eligibility o Trustee must know what benefits the disabled beneficiary is, or may be, entitled to: o If beneficiary currently has benefits, trustee coordinates distributions from the trust to avoid disqualification of those benefits o If a beneficiary is not receiving benefits, trustee works with the guardian or disabled individual to review and determine what benefits may be available o Trustee ensures distributions are in compliance with rules and regulations surrounding governmental benefit eligibility o Permissible distributions include anything that is not deemed to be in-kind support and maintenance o Cash distributions directly to a beneficiary violate the rules

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Constructing Support Team for a Disabled Individual

Your Trustee Attorney

Disabled Individual

Support Team Members Family Members Attorney Financial Advisor Care and Medical Providers Case Manager Insurance Agent Accountant Advocate

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Your CPA Guardian

Put Into Practice – Everyday Situations o Purchase, renovate, and modify homes for SNT beneficiaries o Arrange for purchase of modified vans for SNT beneficiaries o Arrange for special therapy o Establish Special Needs Trusts with assets from a conservatorship o Arrange transportation from hospital o Assist in creating lasting family memories

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Conclusion o Comerica Bank Wealth Management is committed to delivering professional trust administration to the Special Needs Community.

o Comerica Trust has developed specialized training resources for all trust professionals who are passionate about servicing individuals and families with special needs.

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Disclosure Comerica Bank & Trust, National Association is a subsidiary of Comerica Incorporated. Comerica Bank & Trust N.A.’s strategic alliance partners are neither subsidiaries nor affiliates of Comerica Incorporated. Securities and other non-deposit investment products are not FDIC insured; are not deposits or obligations of, or guaranteed by Comerica or any of its affiliates; and involve risk, including possible loss of principal. Past performance is not indicative of future results. Comerica Bank and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation.

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