Financial Planning for Children With Special Needs

Determining the Future of Your ChildJames J. Di Gesu, CPA, PFS, MBA

July 2009

Our Discussion Today

● Who We Are

● Why Special Needs Planning is Important

● What Is Special Needs Planning?

● The Approach: How Do You Plan?

Profile: Who We Are● CPA and financial advisor for 23 years

● Serve high-net worth clients, corp exec, business owners, retirees and families of generational wealth

● Continue to meet the needs of these families as well as serving families with Special Needs children

● Sr. Manager with KPMG and Deloitte & Touche for 12 years

My Special Girl - Andrea

My Special Girls Michela & Andrea

Special Needs in America Today

• 1 out of 9 under 18 get special ed

• Nearly 2 in 7 families have member with disability

• 21 million families have member with disability • 5.5% have both adults and children with a

disability • 76% of the 4.3 million children with disabilities

live at home.

Why Special Needs Planning is Important

● Ensure proper coordination of your financial and legal strategy to benefit you, your child and other family members

● Critical to integrate your assets with government benefits to maximize your child’s quality of life

● If and when you are no longer able to be the primary caregiver for your son or daughter, you will know that you established a plan to care for them

Integrates traditional financial planning with the unique requirements of your special needs family

● Blending your needs with your child’s, plus an effective financial and legal strategy, and access to government benefits

● Can include Wills, Trusts, Guardianship, Education on Government Benefits

● Defines your vision for your loved one’s life

What is Special Needs Planning?

Core Values of Special Needs Planning

● Your Family & Support System

● Financial Planning

● Estate and Legal Matters

● State and Governmental Benefits

● Your Well Being – (i.e., Emotional and Spiritual)

Have You … Yes or No?

1. Clearly defined personal and financial goals?

2. Positioned assets for retirement?

3. Established the future care of your special needs child?

4. Prepared and executed Wills, and prepared a Personal Financial Plan?

5. Created a Special Needs Trust?

6. Thoroughly explored Government Benefits?

7. Selected a Trustee(s) and Guardian?

8. Completed a Letter of Intent?

9. Communicated your plan to friends & family?

10.Achieved Peace of Mind with your current plan?

Reasons to Plan

• Increasing Population with Disability

• Increasing Demands for Services

• Increasing Life Expectancy

• Increasing Costs of Care

• Shrinking Government Resources

What if You Don’t Plan

• The state has their plan for you and your child.

• The state will choose who will care for your child.

• With no plan in place, the guardian and trustee will beunable to care for the financial and emotional needs of your child.

• The state decides how, when or if your assets are distributed.

• If your child holds assets in excess of $2,000, Government Benefits (SSI and Medicaid) could be lost or forfeited

• Due to lost Government Benefits your child’s standard of living could be reduced substantially.

What is Financial Planning I

To develop and implement a family plan to achieve personal financial goals

To accumulate and preserve wealth to meet the needs of you and your family

Main Objective: To Achieve Financial Security for You,

Your Child and Your Family

What is Financial Planning II

• Identify Personal Goals/Objectives

• Gather Personal Information And Documents

• Evaluate Goals And Identify Obstacles

• Develop Strategies And Recommendations

• Design And Implement Plan

• Review And Measure Results

• Revise Plan As Needed

Personal Financial Planning

• Cash and Debt Management• Income Tax Planning• Education Funding Strategies• Retirement Planning• Employee Benefit Plan Analysis• Insurance and Risk Management• Asset Allocation and Investment Management• Estate Tax Planning and Strategies• Business Succession Planning• Special Needs Planning

Special Needs Planning Process

1. Address Issues

2. Identify Resources

3. Estimate Costs

4. Choose Professionals

5. Create Plan

6. Execute Legal Plan

7. Prepare Letter of Intent

8. Monitor and Update Plan

Traditional vs. Special Needs

Wealth Distribution, Home Purchase, Investment Mgmt, College, Retirement

General Personal Financial Planning

Gifts, Inheritances, Transitional Plans, Lifetime Residential Needs, Trust Mngt

Emergency Funds, Family Needs

Cash & Debt Management

Supplemental Expenses, Protection of Government Benefits

Life, LT Disability, LT Care,Health, Home, Auto

Insurance & Risk Management

All Insurances,State Health Plans: Medicare and Medicaid

Wills, Trusts, DPOA’s

HCP,Living Wills

Estate & Legal Planning

Selecting Guardians,Trustees,Care Givers, SNTrust, LOI, Titling

Traditional vs. Special Need Planning

Estate Planning Process

● Maximize Inheritance Designated to Heirs

● Minimize Estate Taxes and Expenses

● Review Testamentary Instruments,

● Beneficiary Designations and Other Documents

● Determine Guardianship of Children

● Distribute Assets to Beneficiaries

● Manage Estate Assets

Why Everyone Needs a Will

● Avoid Intestacy

● Simultaneous Death

● Designate Executor(s) Trustee(s)

● Designate Guardian(s) for Minor Children

● Provisions for Minor(s)

● Specific Bequests

● Marital Assets

The Elements of a Will

Trusts for IndividualsIndividuals and Charity

Who Will Serve as ExecutorExecutor, Trustee or Guardian?

Plan For Plan For Estate TaxesEstate Taxes

Outright DistributionsDistributions of Property

WILL

Elements of A Will

Estate Planning Options

• Distribute Assets to Sibling

• Gifts to the Special Needs Child

• Disinherit the Special Needs Child

• Establish a Special Needs Trust

What is a Trust?

● Minimize Estate Taxes

● Benefits Of Professional Asset Management

● Legacy For Favored Charities (with Tax Benefits)

● Provides For Your Retirement

● Manages Your Affairs If You Become Incapacitated

● Avoids Costs, Delays And Publicity Of Probate

Special Needs Trusts

Definition: The SNT manages resources while maintaining the child’s eligibility for government benefits. There are two types of Special Needs Trusts:

1. Support Trusts – Requires the Trustee to make distributions for the child’s support including food, shelter, clothing medical care and education. However, support trusts are not eligible to receive financial assistance through the Supplemental Security Income (SSI) or Medicaid.

2. Special Needs Trusts (SNT) – These trusts are the most effective approach to assist a child with disabilities.

Special Needs Trusts

Requirements for the SNT

• Trustee must be give absolute control over the distribution of the funds

• The child with special needs can not have the ability or authority to revoke the trust.

• If money is used in a trust for the wrong reason, it could become disqualified and place future benefits in jeopardy.

• The distribution rules of the trust and educating the trustee in the proper use of money is critical.

Requirements of a SNT

• How much needs to be placed into the trust

• Estimate cost of child’s care over their life expectancy

• Value of the parents estate can be left to the trust

• If there are insufficient assets from the estate, the trust can be funded from proceeds of life insurance to meet shortfall

• Use of life insurance helps to meet life-long expenses

Funding the SNT

Life Insurance

Life Insurance

• Term• Permanent or Whole

Life• Universal• Variable• Survivorship or

Second-to-Die

Other Insurance

• Property and Casualty – (Home, Auto, etc.)

• Personal Liability or Umbrella

• Disability• Long-Term Care• Health/Medical

Insurance

Income Tax Benefits

● Cash and Debt Management

● Review Monthly Living Expenses

● Determine Extraordinary Cash Expenses

● Create Emergency Reserve Fund

● Review and Maximize Use of Debt

Cash Management

Income Tax Benefits

• Personal Exemption

• Child and Dependent Care Credit

• Medical Expenses

• HSA’s and FSA’s

• Attending Disability/Medical Conferences

Income Tax Benefits

Education Plans

• Savings Bonds

• Section 529 Education Plans

• Coverdell Education Savings Plans (CESA’s)

• Custodial Accounts - UTMA’s and UGMA’s

• IRA’s and Roth IRA’s

Education Plans

Assemble Your Special Dream Team • Family and Friends • Doctors, Therapists and Other Medical

Professionals• Managed Care Giver(s)• Guardian• Trustee – (Family and/or Corporate)• Attorney• CPA• Personal Financial Advisor

Create Your Dream Team

What is a Managed Care-Giver?

• The Special needs Trust can direct the trustee to hire a care manager. The Care Manager:

• Specializes in arrangements to provide for your special needs child with the level of care required.

• Social work background

Selecting Managed Care-Givers

Selecting Guardians• Guardian Critical for Child with SN’s

• Difficult Decision

• Parents Need to Decide

• Life-long Commitment of Caring

• Designate Guardian within Will

Selecting Guardians

Selecting Guardians

● Has integrity and impartiality● Acts in the best interest of the child● Invests and allocates trust assets to prudent investments● Distributes income and/or assets to the child● Advocate for medical and financial entitlements● Knowledge of accounting and tax-planning● Recordkeeping and reporting ability● Willingness to serve the duration of trust term● Experience as a Trustee● Has special sensitivity to a child with disabilities

Selecting Trustees

Government Benefits

• Special Education

• Social Security

• Supplemental Security Income

• Medicare

• Medicaid

Government Benefits

Government Benefits

Benefits NOT Based on Financial Needs:

1. Social Security

2. Medicare

3. Special Education

Benefits Based on Financial Needs:

1. Supplemental Security Income (SSI)

2. Housing Subsidies (HUD)

3. Food Stamps

4. In Home Support Services

5. State Benefits

Government Benefits

What is a Letter of Intent?

• Details of Biographical, Personal Information and Unique Personality Traits

• Personal Care, Diet, Habits & Daily Routines

• Family Details and Information

• Medical Care, History and Professionals

• Education, Schooling, Social and Recreational Details

• Parents and Child’s Financial Information

• List of Financial Advisors

• Estate and Legal Documents

• Current and Future Governmental Benefits

• Final Arrangements of Child

Letter of Intent

Special Plan Summary

• Create the ‘Special’ Financial Plan

• Execute the ‘Special’ Estate Plan

• Select the ‘Special’ Dream Team

• Share your ‘Special’ Plan

• Be Sure to Take Care of ‘Special’ You

Summary of Special Plan

Selecting Guardians• Currently Sr. VP with Wealth Health LLC – Personal Wealth

Management firm, located in Roseland, NJ, www.wealthhealthllc.com

• My blog on planning for special needs: JDiGesu.com

• Phone at 973-535-9577 or 201-414-4002

• Email: James@JDiGesu.com • Email: jdigesu@wealthhealthllc.com

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