Special Needs
Take additional steps for your special-needs planning.
Ethan’s Story
You might be wondering why I have so passionately developed expertise in the area of special-needs planning. For me, this is not just a business model, it’s a life-long mission. You see, I was born with Cerebral Palsy. When I was growing up, I tended to ignore it. I did not consciously admit there was a problem until I was in my 20’s. When I was playing football, I noticed there was a reduction in my mobility. Something was going on, but I chose to ignore it. I avoided seeking medical advice.
But when my son, Dylan, was born he was diagnosed with Hereditary Spastic Paraplegia. I was then tested and learned that I too had HSP. Now that I am in my 30’s I have noticed a continued decline in my mobility. I went from walking independently to walking with a cane and now to walking with crutches. As my mobility has diminished, I have continued to make adjustments in my life. My family has had to adapt as well.
Fortunately, I have been able to live a fairly normal life. I have a family that was willing to care for me. I attended private school and was able to become my best self. But I know that many families do not have that luxury. I do know, however, that families want to provide for their disabled family members as best they can regardless of their individual situations.
As an advisor to families with special needs, I understand the decisions you will have to make. I can be a sounding board and I can help you and your family navigate these complexities. I will work with you to create a plan that is best for you. As life evolves, I will continue to work with you to make needed modifications to your plan as circumstances dictate. I will be there for you.
Together we can do this.
There is no charge for the initial consultation.
Additional considerations for lifelong care
Attaining financial security and independence while coping with inflation, market volatility and taxation, is a challenge for anyone. For families with a dependent with disabilities that may require life-long care, there are additional considerations. Families faced with providing supervision and care for their loved ones during their lifetime and even after their own death must completely or at least partially fulfill the following functions for a loved one with disabilities:
- Guardianship: decision making role regarding medical, residential, educational and physical welfare
- Financial support and management
- Advocacy services: enlisting help from agencies and integrating with planning
- Living arrangement: either at home, community-based alternatives or group homes
Family Preparedness
Caregivers — More than 43 million people in the US are caring for a family member with a special need, disability, or traumatic injury. And many of these individuals are also holding down full-time jobs. You don’t have to be wealthy or old to seriously consider the benefits of proper planning, including, but not limited to, a legal will or trust. Careful planning is the key. If you have a dependent with a disability then planning for guardianship is paramount. It is better for you to make these decisions than leave them to the court to decide. The process for planning must ensure that the dependent receives a lifetime of adequate care and support, which usually means eligibility for governmental benefits. As someone with a disability and who has a dependent with a disability, Ethan Freishtat can empathize with you—and more importantly, help you navigate the steps.
How We Help
The Legacy Financial is dedicated to providing planning solutions for families with a special-needs family member. Our process involves comprehensive planning and addresses the needs of individuals with disabilities to provide life-long care. Our planning encompasses the utilization of government benefits in coordination with legal and financial planning, including annual reviews.
We provide consultations as well as full-service financial planning to families with members who have developmental disabilities, physical disabilities and/or mental illness. We maintain a network of attorneys, CPAs, insurance, and social service professionals with expertise in special-needs planning. Multiple issues are addressed as a team, including:
- Coordination of State and Federal Funding
- Appropriate legal planning
- Trusteeship and Guardianship
- Tax Advantage Planning
- Funding Strategies
- Flexibility, affordability and continuity
The Benefits to You
You will gain confidence in the knowledge that a well-designed financial and legal plan, tailored to a specific situation, will be created and monitored by a group of dedicated and caring professionals.
Special Needs Trusts
If you have a loved one with special needs you have to think about how they will be cared for upon your demise. You can opt to:
1) Disinherit them and hope the government will provide sufficiently for their needs
2) Make them your beneficiary, which will make them ineligible for government assistance
3) Set up an ABLE account, which may limit or reduce government assistance
4) Set up a special-needs trust, or supplemental-needs trust, which provides funds to a disabled beneficiary without interfering with eligibility for government assistance
A special-needs trust is only as good as its funding mechanism. This can be accomplished with investments, cash, life insurance, or an annuity. Often it is a combination of these strategies.
A special-needs trust is a type of irrevocable trust. A trustee, usually a family member, is named to administer the trust assets. The terms of the trust are carefully worded to state that the assets are to be used only for the benefit of the disabled individual.
With a special-needs trust, a parent or guardian can make investments on behalf of a disabled dependent, and a trustee is named to assume the responsibilities of the trust.
Taxation and Drawbacks
As an irrevocable trust, it is considered its own separate taxable entity, with its own tax identification number. It is subject to compressed trust tax rates. It takes only $12,500 in earnings to trigger the highest federal marginal tax rate of 37%, any applicable state income tax, and the surtax on net investment income from the Affordable Care Act.
All assets in a special-needs trust are nonqualified and subject to annual taxation on any investment gains. Finding a tax-efficient vehicle to lessen tax drag may be one of many issues that the trustee, in conjunction with us as the financial advisor, will help determine.
Investments, insurance, and annuities
Life Insurance Funded
Life insurance can play a role in a special-needs trust because it provides a large lump sum at the exact time it is most needed, upon the death of the caregiver, for an amount that is greatly leveraged. If the insurance proceeds are then invested and managed correctly, it can provide needed funds in a manner that protects the beneficiary’s eligibility for government benefits.
Annuity Funded
A properly titled annuity can help preserve capital in a tax-efficient manner while maintaining eligibility. There are many different kinds of annuities and it takes diligence to find one that precisely meets the needs of the beneficiary.
Managed Portfolios
A managed account is a personalized portfolio built for a particular investor and actively managed by us in our capacity as an investment manager. Armed with discretionary authority, we make investment decisions appropriate to our client’s needs, goals, risk tolerance, and asset size. As investment managers we are fiduciaries and must act in the best interest of the client at all times.
SSI, Medicaid, and benefit eligibility
To qualify for these government programs, an individual must meet strict—and very low—income and asset levels. For Medicaid, the limits vary state-to-state. Navigating the rules regarding Social Security benefits can be a tricky endeavor. There may be things that you think are appropriate only to find out that they reduce benefits. For instance, these items will reduce SSI benefits:
- Basic shelter related expenses
- Food
- Basic items of clothing
- Cash for any purpose
CHSNC stands for Chartered Special Needs Counselor. Courses of study under this program included disability law, life insurance, healthcare issues, special-needs trusts, the ABLE Act, government benefits, Social Security, Medicaid complexities, special education, estate planning, retirement planning, and tax deductions. The CFP® designation stands for Certified Financial Planner. When you work with a CFP® professional, you can be assured that you’re working with a financial advisor who has demonstrated competency and made a commitment to ethics.
The Legacy Financial and Great Valley Advisor Group do not provide tax or legal advice or services. Please consult with your tax or legal advisor regarding your specific situation. Insurance is offered separately by Ethan Freishtat as an independent insurance agent.
Concerned about your family’s special needs?
Arrange a free 30-minute consultation with Ethan Freishtat, CFP®, CHSNC®.