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for the Future This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. – PowerPoint PPT presentation

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Title: For producer use only. Not for presentation to the public.


1
Providing for the Future
2
  • 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. Anyone 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
What is a Special Needs Trust?
  • Ensures funds reach person with disability when
    needed
  • Trusts principal and earnings supplement
    disabled beneficiarys care
  • Trust funds are not used to pay benefits provided
    by government programs

4
What is a Special Needs Trust? (cont.)
  • Generally established for people who receive
    Supplemental Security Income (SSI) and Medicaid
  • In order to receive SSI and Medicaid, ones
    assets cannot exceed specified level
  • Trust grantor can specify that trustee not
    replace cost of governmentally sponsored programs
  • Trust only provides funds for certain items,
    services, or other expenses not covered by SSI
    and Medicaid

5
Parties to a Special Needs Trust
  • The trust grantor(s)usually the family
    of disabled individual
  • The trust beneficiarydisabled individual
  • The trustee(s)the person(s) responsible for
    managing and investing trust assets on behalf of
    person with disability

6
Growing Demand for Special Needs Trusts
  • 13.8 of school-age population was served in
    federally supported programs for the disabled in
    200420051
  • Approximately 5.3 million Americans have a
    permanent disability as a result of traumatic
    brain injury2

1 National Center for Education Statistics,
Digest of Education Statistics, 2005. 2 Centers
for Disease Control and Prevention, Department of
Health and Human Services, May 2007.
7
Growing Demand for Special Needs Trusts (cont.)
  • In 2006, about 7.5 million persons received
    benefits based on disability in the U.S.3
  • An estimated 9.4 million children in the U.S.
    have special health care needs4

3 SSI Annual Statistical Supplement, 2006,
Social Security Online, June 2007. 4 Health
Resources and Services Administration, Maternal
and Child Health Bureau. The National Survey of
Children with Special Health Care Needs
Chartbook, 2001.
8
Why Careful Financial Planning Is Important
  • Assets over 2,000 disqualify disabled individual
    from most federal needs-based assistance programs
  • Laws and services vary from state to state

9
What Medicaid Provides
  • 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.
10
Contributing toward the Cost of Care
  • People with disabilities who receive publicly
    funded services must contribute toward cost of
    their care on sliding scale
  • Personal care allowance covers costs of clothing,
    toiletries, and related items
  • Family members often subsidize additional costs

11
Financial Planning Provides Options
  • Parents or spouse can help buy extras
  • Coordinates public and private funding to provide
    comfortable lifestyle

12
Establishing the Trust
  • Complex laws govern trusts
  • Laws vary from state to state
  • Work with experienced attorney to preserve
    government benefit eligibility

13
Establishing the Trust (cont.)
  • The Special Needs Trust must
  • not be funded with assets owned by person with
    disability
  • be managed by trustee other than person with
    disability
  • give trustee discretion to provide assistance
    and
  • not give person with disability more income or
    resources than permitted by government

14
Establishing the Trust (cont.)
  • The Special Needs Trust must also
  • not replace government benefit programs
  • define what supplementary means
  • The Grantor must also
  • provide Letter of Intent
  • determine who should receive remainder of trust
  • include choices for successor trustees

15
Preserving Eligibility
  • Omnibus Budget Reconciliation Act of 1993
  • OBRA trust funded with assets owned by disabled
    person
  • Trust carefully written to comply with OBRA '93
  • State providing services for disabled individual
    paid back when beneficiary dies

16
Funding a Special Needs Trust
  • Cash
  • Stock
  • Personal property
  • Real estate
  • Life insurance

17
Owning Life Insurance
  • An ideal way to provide for a special needs child
    or a dependent adult because death benefit is
  • federal income taxfree
  • immediately available, and
  • usually received without having to go through
    probate

18
Understanding the Costs of a Disability
  • Understand costs associated with specific
    disability and impact on receiving government
    benefits
  • Costs vary with each individuals needs

19
Avoiding Common Mistakes
  • Families wish to set aside as much money as
    possible to maintain disabled persons quality of
    life
  • A common mistake is placing money in a Uniform
    Transfer to Minors Account
  • Money held in childs name can eventually
    disqualify child from government assistance,
    unless an OBRA trust is established

20
Example The Smith Family
  • Jim and Jane Smith are both 54
  • 13-year-old son, Mike, has Down syndrome
  • Want to ensure Mike continues to receive
    government services while being able to pay for
    supplemental needs

21
Example The Smith Family (cont.)
  • Smiths consult with their financial advisor,
    insurance professional, and attorney experienced
    in special needs planning
  • Jim and Jane create Special Needs Trust

22
Example The Smith Family (cont.)
  • Smiths financial advisor and insurance
    professional
  • Examine Smiths Letter of Intent
  • Perform detailed financial analysis based on
    future cost of supplementary items
  • Explore available resources to fund trust now and
    in future

23
Example The Smith Family (cont.)
  • One option funding trust with life insurance
  • Only life insurance provides instant liquidity in
    event of caregivers death

24
Remembering Other Family Members
  • Dont forget other family members who may share
    in care of disabled person
  • Siblings should be considered in parents
    overall estate planning
  • Relative as trustee should be compensated for work

25
Achieving Important Goals
  • A Special Needs Trust can help clients with
    disabled family members achieve vital estate
    planning and financial goals
  • Proper planning allows disabled person to enjoy
    comfortable lifestyle while preserving
    governmental program eligibility

26
  • Transamerica Life Insurance Company, Transamerica
    Financial Life Insurance Company (collectively
    Transamerica), and their 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 be
    urged to 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 Transamericas 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 October 2007.
  • Life insurance products issued by Transamerica
    Life Insurance Company, Cedar Rapids, IA 52499,
    or Transamerica Financial Life Insurance Company,
    Purchase, NY 10577. All products may not be
    available in all jurisdictions. Transamerica
    Financial Life Insurance Company is authorized to
    conduct business in New York. Transamerica Life
    Insurance Company is authorized to conduct
    business in all other states.

27
Providing for the Future
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