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. Click here to reserve your time.
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
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 then 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. We know. It seems overwhelming. Given the hectic nature of your day-to-day life this can be a challenge. That is why you delegate some of the work to a qualifed planner. As someone with a disability and who has a dependent with a disability, Ethan Freishtat can totally empathize with you but more importantly, he can help you navigate the steps. Preparation is the key. Delegate the planning to Ethan and his team and rest knowing that you did the best for your family.
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.
HOW WE HELP
HOW WE HELP
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.
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) You can 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) You can set up a special needs trust, or supplemental needs trust, which provides funds to a disabled beneficiary without interfering with eligibility for government assistance.
SPECIAL NEEDS TRUSTS
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 streategies.
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’s subject to compressed trust tax rates. It takes only $12,500 in earnings to trigger the highest federal margin 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.
Funding the Trust
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. No other financial vehicle provides that degree of return.
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, food, clothing, shelter, and transportation benefits.
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.
A managed account is a personalized portfolio built for a particular investor and actively managed by us in our capacity as an investment manager. The account may contain cash, investment funds, commodities, derivitives, laddered bonds, equities, structured notes, ETF's, mutual funds, various assets, or even titles to property.
Armed with discretionary authority over the account, we are actively making investment decisions appropriate to our client's needs, goals, risk tolerance, and asset size. While we have the authority as investment managers, to buy and sell assets without the client's prior approval, they of course must be in accordance with the client's objectives. As investment managers we are fiduciaries. In this role, we must act in the best interest of the client at all times or potentially face civil or criminal penalties. While we make trades when we deem them appropriate for the client's goals, the client is very much involved in ongoing discussions abour their risk tolerance, market factors, holdings, and of course the account's performance. Regular reporting is provided as well as online access.
Since the portfolios are highly customized we can carefully dial in the selection of investments and allocate assets that impact returns, studies have found that minimizing taxes also has a significant effect. Tax-efficient investing involves many considerations including choosing the right investments and the right accounts to hold those investments. Managed account trades can be timed to minimize tax liability. As an example, tax-managed funds and ETF's tend to be more tax-efficient because they trigger fewer capital gains. Actively managed funds, on the other hand, tend to buy and sell securities more often, so they have the potential to generate more capital gains distributions but that may be preferable to seek higher returns.
The trustee may be given discretion to utilize those assets in the manner they see fit. Since these funds are available on an as-needed basis, there will be some years when no withdrawals are taken and other years when large ones are taken.
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, but in general if an individual is within 133% of the federal poverty level, he or she can qualify for it. In 2019, the federal poverty level is $12,490 for a single-person household. If an individual earns more than this, he or she may not qualify for all Medicaid benefits
Navigating the rules regarding SS 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
- Basic items of clothing
- Cash for any purpose
The complexities, nuances and changing legal and financial environments are reasons why you need a team to help you navigate and put you and your family in the best situation.
You might be wondering about the the "letters" after my name. These are designations earned after extensive coursework and training. 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
- Tax deductions
The CFP designation, which is also from The American College of Financial Services, stands for Certified Financial Planner. It is one of the top certificates in financial planning available today. 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. CFP® professionals must successfully complete a multi-year, multi-step process to obtain the skills and real-life experience they need to serve your best interests, no matter what your financial goals are. Key areas of training included:
- Financial planning roles and responsibilities
- Planning for insurance needs
- Income taxation for individuals
- Retirement planning
- Principles of investments
- Estate planning strategies
Are you concerned about your own family’s special needs? Click here to arrange a free 30 minute consultation with Ethan.