Replacing the Irreplaceable ParentThe Special Needs Dilemma

By

Andrew H. Hook, CELA, CFP

Sandra Smith, CELA

(c) Oast & Hook, 2009 2

Most Parents Lack a Plan

The Hartford Financial Group: 62% of Parents with Special Needs (SN) Children do not have a plan and those that do, make costly errors.

Met Life: 73% have not begun setting aside money for their SN children & don’t know where to turn for advice

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The Solution Comprehensive Special Needs Plan:

It is more than drafting a SNT Developed with Multi-Disciplinary Expertise:

Legal Tax Financial Planning Social Work

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Components of SN Plan Sources of Income &

Support Special Education Insurance

Life Insurance Health & Medical

Public Benefits Tax Legal

Letter of Intent Surrogate Decision

Making Housing Choice of Care Givers

& Fiduciaries

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Sources of Income & Support

Distributions from SNT SSDI SSI Military & Civil Service Survivor Benefits Family Support

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Special Education Individual Education Plan Age of Majority

Guardian Special Ed POA Local Educational Agency appoints

representative Transition Planning

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Life Insurance

Provides source of funds after parent’s death for care of child with SN

Consider Permanent Life Insurance (LI) Needs Analysis

Develop Budget Retain CFP to calculate unfunded need

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Health Insurance & Benefits

Parent’s Group Health Insurance COBRA HIPAA

Medicaid Medicare

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Tax Planning Income Tax Deductions CESA’s 529 Plans Tax Credits

Dependent Care Elderly and Disabled

Distributions from IRA to SNT

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Legal Special Needs Trusts (SNTs) Alternatives to SNTs

Pooled Disability Trusts Able Accounts?

Modification of EP for Parents & family members

Review DOB’s Review Title of Assets

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Letter of Intent Personal Information Medical Information Public Benefits Housing/Living

Arrangements Abilities & Disabilities Personal

Characteristics

Activities Personal Care Meals Expectations for the

future Additional Information

& Instructions

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Surrogate Decision Making Power of Attorney (POA)/Advance Medical

Directive HIPAA Privacy Waivers Special Ed POA Guardianship/Conservatorship Representative Payee

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Housing/Living Arrangements

Traumatic Events Moving away from home Losing Parents

Avoid a Simultaneous Double Blow Finding or Creating

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Living Arrangements Family Members

Estimated that 76% of persons with developmental disabilities live with family members

31% of parents expect a sibling to care for a SN child

Supported Living Arrangements

Independent Living Arrangements with some support

Long term care facilities

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Choice of Fiduciaries Available Choices

Family Professional advisors Corporate Fiduciaries Non Profits

Consider different persons for different roles Oversight Different Skills

Roles Guardian/Conservator Representative Payee Caregiver Trustee Trust Advisory

Committee Trust Protector

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Family DynamicsThis Family is Different

Guilt, Anger & Grief Excessive Optimism Depression

Marital Relations Siblings Spiritual Issues

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Special Needs Planning SNP must be more comprehensive than

drafting an SNT SNP is multidisciplinary The Successful SNP firm should develop a

multidisciplinary practice model.

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The Parents Robert and Sandy. Ages 55 and 49. Smithfield, Virginia. Robert: PI attorney. Sandy: Teacher. Three Children

Bobbie Jackie Theresa

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Background Robert is a successful attorney. Sandy is a teacher who is helping her parents who

are in early stages of dementia and her special needs daughter, Jackie.

The beach cottage is a family vacation property which is rented when not used by the family.

Robert and Sandy’s investments are scattered among several commissioned accounts.

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Bobbie and Theresa Bobbie

Age 22. Unmarried. Attends the

“University.” Dates an “older

woman” he met on a road trip to DC.

Has trouble living within his budget.

Theresa Age 27. Divorced. Graduate of the Darden

School & works in Charlotte

Poor taste in “men.”

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Jackie Age 18. Unmarried. Jackie has special needs and will not be able

to live independently. Special education. Lives with Robert and Sandy

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AssetsAsset Robert Sandy Joint

Residence $750,000

NC Cottage $500,000

Savings $25,000

Mutual Fds $200,000

Ret. Plan $1.0 M $100,000

LI (DB) $250,000 $50,000

Assets $1.25 M $175,000 $1.45 M

Debt $700,000

Net Assets $1.25 M $175,000 $745,000

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Objectives Develop a plan to provide Jackie with a home

and a source of support. Provide for the management of their assets if

they become disabled. Reduce personal liability. Plan for their retirement. Avoid multistate probate. Protect Jackie’s SSI and Medicaid.

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Support and Income for Jackie Apply for SSI

Deeming ends at 18 Perform Needs Analysis for Jackie

Purchase 2nd to Die LI to provide for unfunded needs

After Robert’s retirement or death SSDI

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Health Benefits for Jackie Robert’s Group Health Insurance

HIPAA COBRA

Medicaid Medicare

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Cottage Robert forms a single member LLC and

transfers the cottage to the LLC. Robert assigns 50% of the membership

interests to Sandy. Goals obtained

Limitation of liability. Centralization of management of cottage.

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Jackie’s Home Form LLC with two other couples. Member managed . LLC purchases home with borrowed funds. LLC leases home to children under Section 8

program. Children pay rent using SSI. Supportive services provided by Medicaid

and privately provided services.

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RLT Fully funded to avoid probate. Consolidated Investments with Fee Based Advice CST (no distributions to Jackie) with special POA. Upon 2nd to die:

Interest in LLC owning Jackie’s home to SNT. DST’s for Bobbie’s and Theresa’s share

Lifetime duration. Corporate trustee with child as co-trustee. Trust advisor.

Jackie’s remaining share funded by 2nd to Die LI.

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SNT Andy, family atty, initial trustee. Corporate successor trustee. SNT owns 2nd to die LI Irrevocable with Crummey Wd powers

Exclude Jackie Bobbie and Theresa - trust advisory committee. After Robert and Sandy’s death, it will hold interest in

Jackie’s home and Jackie’s share. Trustee has right to amend to protect Jackie’s benefits.

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Jackie’s Estate Planning Third Party Created

Guardianship/Conservatorship Representative Payee

Self Created Power of Attorney Advance Medical Directive Special Ed POA