Download Producer Special Needs Trust Presentation

Providing
for the Future
For producer use only. Not for presentation to the public.
OLA 1381 T 1008
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.
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For producer use only. Not for presentation to the public.
What is a Special Needs Trust?
 Ensures funds reach person with disability when needed
 Trust’s principal and earnings supplement disabled
beneficiary’s care
 Trust funds are not used to pay benefits provided by
government programs
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For producer use only. Not for presentation to the public.
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, one’s 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
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Parties to a Special Needs Trust
 The trust grantor(s)—usually the family of
disabled individual
 The trust beneficiary—disabled individual
 The trustee(s)—the person(s) responsible for managing
and investing trust assets on behalf of person with disability
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Growing Demand for
Special Needs Trusts
 13.8% of school-age population was served in federally
supported programs for the disabled in 2004–20051
 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.
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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.
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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
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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.
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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
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Financial Planning Provides Options
 Parents or spouse can help buy extras
 Coordinates public and private funding to provide
comfortable lifestyle
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Establishing the Trust
 Complex laws govern trusts
 Laws vary from state to state
 Work with experienced attorney to preserve government
benefit eligibility
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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
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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
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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
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Funding a Special Needs Trust
 Cash
 Stock
 Personal property
 Real estate
 Life insurance
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Owning Life Insurance
An ideal way to provide for a special needs child or a
dependent adult because death benefit is:
 federal income tax–free
 immediately available, and
 usually received without having to go through probate
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Understanding the Costs of a Disability
 Understand costs associated with specific disability and
impact on receiving government benefits
 Costs vary with each individual’s needs
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Avoiding Common Mistakes
 Families wish to set aside as much money as possible to
maintain disabled person’s quality of life
 A common mistake is placing money in a Uniform Transfer
to Minors Account
 Money held in child’s name can eventually disqualify
child from government assistance, unless an OBRA trust
is established
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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
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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
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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
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Example: The Smith Family (cont.)
 One option: funding trust with life insurance
 Only life insurance provides instant liquidity in event of
caregiver’s death
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Remembering Other Family Members
 Don’t 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
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For producer use only. Not for presentation to the public.
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
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For producer use only. Not for presentation to the public.
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 Transamerica’s 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.
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For producer use only. Not for presentation to the public.
Providing
for the Future
For producer use only. Not for presentation to the public.
OLA 1381 T 1008