Integrating Special Needs and Financial Planning Andrew H. Hook, CELA, CFP® Oast & Hook, PC Scott MacDonald, FVP, CSNA Merrill Lynch First Vice President - Investments Portfolio Manager - PIA Program 2011 Special Needs Alliance Boot Camp

Case Study - First Party SNT 41 year old quadriplegic with cognitive issues Rents in rough neighborhood Sister provides in-home assistance $224/month SSDI, $450/month SSI and on Medicare and Medicaid Expected to receive $3.2-$3.5 million $210,000 annual expenses

Case Study - First Party SNT Challenges Family has language and cultural barriers PI Atty and Client’s sister want no risk in investments Would like to purchase home - $600,000 Difficulty in estimating budgetary expenses Client needs adaptive van every 5-7 years

Case Study - First Party SNT Insights Assets insufficient to support expenses throughout Client’s life expectancy. Home purchase reduces available capital and increases fixed costs How do we preserve capital and assets for his lifetime? Need to model multiple non-recurring expenses into the future.

Third Party Special Needs Planning Case Study   Andy (age 62) and Maureen (age 60) are in good health and have two children, Alexis (age 29) and Lauren (age 26). Alexis is single, a graduate of the Darden School at the University of Virginia with a MBA, and heavily indebted (about $110,000) with school debt. Although they had hoped to do so, Andy and Maureen had not been able to assist Alexis with her graduate school tuition while providing for Lauren. Lauren has autism with low intellectual functioning and lives with Andy and Maureen. After graduation with a special education diploma, she began work in supported employment with a job coach. She receives SSI and Medicaid benefits. In addition to Medicaid, Lauren has health insurance through Andy's group health insurance policy. Andy and Maureen have the following assets: Andy Maureen Joint Bank Accounts $40,000 Brokerage Act $200,000 Home $350,000 (FMV) $50,000 (HELOC) 401(k) $350,000 Total $540,000 After reading Stocks for the Long Run, Andy used a 70/30 asset allocation; the recent stock market recession has not been kind. In addition to these assets, Andy owns a whole life policy with a death benefit of $125,000 and a cash value of $40,000. Andy and Maureen do not own long term care insurance. Andy’s mother and Maureen’s mother are still alive, with the potential of a total inheritance of about $250,000.

Case Study – Third Party SNT Andy (62) and Maureen (60) – 2 children Alexis (29), single, MBA and heavily indebted Lauren (26), autistic, lives with them and works Receives SSI and Medicaid Also has health insurance through Andy’s work

Case Study – Third Party SNT Assets Bank Accounts - $40,000 Brokerage Account - $200,000 Home - $350,000 (FMV) and $50,000 (HELOC) Andy 401K - $350,000 Andy LI - $125,000 (Death value) and $40,000 (cash value) No LTCI Potential Inheritance - $250,000

Case Study – Third Party SNT Income Andy Salary - $150,000 Andy plans to work 4 more years SSA at 66 is $2,306 SSA at 70 is $3,074 Maureen is retired - $30,000 pension SSA is $1,556

Case Study – Third Party SNT Concerns Plan for retirement Estimated annual expenses - $150,000 Lauren’s annual expenses - $40,000 Estate to provide for Lauren and provide inheritance for Alexis

Case Study – Third Party SNT Plan Created 3rd Party SNT for Lauren as part of estate plan SNT will name bank as trustee, Alexis as trust protector SNT authorized the trustee to retain and pay for professional case management Create financial plan

APPENDIX, ASSUMPTIONS And METHODOLOGY

IT ALL COMES DOWN TO SPECIALIZATION Evaluating Financial Advisors; Given how important it is to have an accurate budget and secure investments, how do you choose the right financial advisor? IT ALL COMES DOWN TO SPECIALIZATION Just as you would not seek a traditional attorney to consult on complicated benefits issues or draft a complicated SNT, you should be wary of generalist financial professionals for your cases. Seek a qualified specialist: Ask them what experience they have with families with disabilities. Can they show you examples of their planning work? What references do they have from families with disabilities? Check them! What Specialized Professionals do they work with? Get references and check them! Do they have any Special Needs Planning Certifications? How do they charge, and is there a conflict of interest? What experience do they have with Court Supervised Accounts and the special laws governing their investments? How many cases do they currently manage? What value of assets under management? What articles have they written or been featured in? Can they show you examples of their educational outreach materials?