1. April 2010 Stephen W. Dale Dale Law Firm, PC 1

2.  Much of this presentation is from a series of programs we have done for financial advisors to familiarize them with the need for this sort of planning and to demonstrate not only the value to their clients – but the business opportunity this sort of planning presents.  Any reference to US Trust can be replaced with almost any financial group. 2

3.  Short Stephen Dale and Dale Law Firm, PC Story  I have built a practice focused on serving the needs of persons with disabilities and their families 3

4. I will be discussing the advantages of working with a team in order to add a social service element to your practice so that you can serve clients with disabled loved-ones 4

5.  In many cases (not all) I incorporate this type of planning in what is commonly called a Discretionary or Special Needs Trust.  But a document itself cannot provide protection – it takes a team – and that’s where you come in. 5

6. My talk will include: 1. A little history 2. The fact that many social service systems are facing an unprecedented failure 3. How that failure affects most families in some way 4. How this unfortunate situation provides an opportunity to serve your clients - in some cases for several generations 6

7.  Imagine that you have a 17 year old daughter named Kathy  Kathy has a disability and is going to need assistance for the rest of her life  Kathy could live 70 years or longer 7

8.  Many families are seeking answers on how to provide quality of life for their disabled loved ones  You probably have clients with these needs that you may not even be aware of.  More and more the financial industry is providing services that traditionally have been provided by the government. 8

9.  Many families don’t trust that the government will be there to provide for their disable loved ones  Many are looking at alternatives for provision of services and advocacy 9

10. Special Needs Trusts = Welfare Program 10

11.  The fact is that there are programs where services are only available to public benefits recipients  Put a value on the benefits  Families are seeking quality of life  Spending thousands of dollars to preserve hundreds of dollars worth of benefits doesn’t make sense  Advocacy is the highest priority  Many families of means are looking for tax breaks 11 11

12. Disability =Poverty 12

13.  All too many practitioners focus exclusively on preservation of public benefits in their Special Needs Trusts and miss the big picture  There is no such thing as a Special Need.  Special Needs Trust planning is not poverty planning  Affluent families have disabled loved ones also 13

14. Does my disabled loved one need Special Needs Planning?  Could the beneficiary manage funds without great assistance?  Build flexibility to deal with changed circumstances  Focus on advocacy and asset protection  Could keeping qualification for SSI or Medicaid be a tool to assist my disabled loved one? 14

15.  There has always been a gap between the haves and have-nots  The Gap is now a chasm  If I have a wealthy client – I can perform miracles  For families with limited means – their options are often limited 15

16. Many of these conditions are more prevalent than you might think 16

17. Let’s look at one segment of the Developmental Disability Community 17

18. California 1 of 154 school aged children are diagnosed with Autism 18

19. You are encouraged to copy, email, print, distribute, and display these images on your website. Data references can be found here.here. In 1992 there were 15,580 cases of children with Autism ages 6-22 In 2006 there were 224,594 cases of children with Autism ages 6-22 19

20. In 2006, there were an estimated 24.9 million adults aged 18 or older in the United States with Serious Psychological Distress. (see http://www.oas.samhsa.gov/NSDUH/2k6NSDUH/2k6results.cfm) 20

21. Approximately 4.4 percent of U.S. adults may have some form of bipolar disorder during some point in their lifetime. (see http://www.pendulum.org/bpnews/archive/001884.html) 21

22. In 2006, an estimated 22.6 million (9.2% of the population aged 12 or older) were classified with substance dependence or abuse in the past year based on criteria specified in the Diagnostic and Statistical Manual of Mental Disorders, 4 th edition (DSM-IV). 22

23.  What you will often find is that the parents often serve as the advocates of their disabled children  Often parents will expect that the disabled child’s sibling will continue to serve as that advocate  In all too many cases this expectation is unrealistic 23

24.  California has been dismantling its social service system  Most county mental health programs have been almost completely eliminated or reduced to their bare bones  California’s budget crisis has caused proposals for even greater reductions in benefits and programs 24

25.  Many state’s social service programs are facing an unprecedented failure due to budgetary constraints and a lack of commitment to the disabled community.  This failure affects almost every family in some manner. 25

26.  This situation also presents the Trustee of a Special Needs Trust with the challenge of how to provide life-long services when programs that support the disability community are constantly changing.  Courts and public agencies are exercising greater scrutiny and oversight over Special Needs Trusts 26

27.  On February 5, 1963 President Kennedy submitted a speech to Congress entitled “A Special Message to the Congress on Mental Illness and Mental Retardation.”  Congress promptly passed the Mental Retardation Facilities and Community Mental Health Centers Construction Act (P.L. 88-164), beginning a new era in Federal support for services for persons with mental health and developmental disabilities. 27

28. President Kennedy called on Congress to replace institutions with comprehensive community programs to provide outpatient care, day treatment, rehabilitation, foster-home services and public education on mental health. 28

29.  A Joint Commission recommended a tenfold increase in spending on services for mental health and developmental disabilities over the next 10 years, as well as increases in training to ensure availability of the necessary workforce to serve this population  Funding would be redirected to communities—to hospitals or nonprofit community agencies—and not long-term institutional services  Eventually, it was hoped, state hospitals would be replaced by the community programs 29

30. JFK’s challenge to go to the moon succeeded – but the challenge for community mental health barely made orbit and has been in a continual decay ever since 30

31.  Unfortunately, Congress did not fully follow the Joint Commission recommendations  Today most community mental health programs are poorly funded and poorly staffed  Many State Hospitals have been closed but the full scope of services they provided have not been moved into the community 31

32.  Under the Lanterman Act persons with developmental disabilities have been moved into the community through the regional center system  One of the most essential programs they provide are residential services 32

33.  Most of the residential providers have not had a substantive increase in their rates in 10 years  Many of the providers have been dependent upon the equity in their houses to keep their programs afloat  California is proposing a 3% reduction in services  California is not investing in new programs  Thousands of new RC consumers are about to hit the housing market 33

34.  July 2009, Governor Schwarzenegger signed a $24 billion budget reduction that included $16.1 billion in spending reductions  When included with the $15 billion in reductions passed in February, the cuts amount to approximately $31 billion 34

35. The Governor permanently eliminated adult dental, optometry, chiropractic, podiatry, psychology Medi- Cal funded services, and others services 35

36. With tax revenue declining a majority of states are instituting spending cuts to social service programs that reduce necessary services for persons with disabilities and their families.  (From Elizabeth McNichol and Iris J. Lav, “New Fiscal Year Brings No Relief From Unprecedented State Fiscal Problems,” Center on Budget and Policy Priorities, revised Sept. 3, 2009.) 36

37.  States are cutting or eliminating services because the recession has caused declining revenues used to pay for these services  At the same time, the need for these services has risen as the number of families facing economic difficulties increases 37

38. 1. Awareness that California and the Nation are not providing adequate care for their disabled citizens 2. Identify your clients that have disabled loved ones that need some level of advocacy and support 3. Become familiar with the U.S Trust and how they can partner with your office 4. Document the plan in a Special Needs Trust or Discretionary Trust 38

39. Awareness that California and the Nation are not providing adequate care for their disabled citizens  Government programs that do exist are in jeopardy of being eliminated  There are no effective government based programs to monitor the quality of life of a disabled person  Many disabled persons are subject to abuse 39

40.  Identify your clients that have disabled loved ones that need some level of advocacy and support  Could be an immediate family – spouse, children, grandchildren or parents  Could be someone not related  Talk to your clients or “plant seeds” 40

41. Become familiar with the U.S. Trust group and how they can partner with your office.  Have U.S. Trust help create a team that can effectively provide the services and advocacy that clients are seeking  Plan with your clients how to set aside the resources and effectively manage those resources for their disabled loved-one’s lifetime 41

42. Document the plan in a Special Needs Trust or Discretionary Trust that incorporates:  The intent of the client  The team to carry out that intent  The flexibility needed to adjust to changes in the beneficiaries condition or the social service delivery system  The tools to get the best investment and tax result 42

43.  The disability community is a diverse community  Every beneficiary is different  The plan needs to be flexible to adjust to the beneficiaries good times and bad times  In most cases the trust must last for the lifetime of the beneficiary, meaning money under management for a very long time  You have an opportunity to provide the assurance of life long advocacy to your clients that have disabled dependants 43

44.  You almost certainly have clients that are seeking a solution about how to provide for their disabled loved ones  It may not occur to your clients to turn to their financial advisor for help  Many times these plans last for a very long time 44

45.  After focusing on Special Needs Trusts for over 18 years – I have come to the conclusion that building a management team to administer the Special Needs Trust is the single greatest factor in whether a trust will succeed of fail  I wish I could draft a document that would protect a disabled person – but it just isn’t possible The Bob Jones Special Needs Trust 45

46.  Will use discretion in the best interest of the disabled beneficiary  Must understand public benefits and keep up with changes in the law  Can wisely invest and conform to all statutory fiduciary requirements  Understands taxes  Keeps perfect books  Provides advocacy and prevents abuse  Is immortal 46

47. Divide The Duties Into Three Categories Financial Can wisely invest and conform to all statutory fiduciary requirements Understands taxes Advocacy Will use discretion in the best interest of the disabled beneficiary Must understand public benefits Provides advocacy and prevents abuse Accountability Keeps perfect books Carries insurance, is bondable or has deep pockets Is immortal 47

48.  The Trustee manages funds, makes distributions, does taxes, keeps records  The Trustee directed by a Trust Advisory Committee which directs distributions, can amend the trust or replace the Trustee  Can include care manager Trustee Advisory Committee 48

49.  The Trustee manages the funds  The Trustee can be directed by a Care Manager  The Care Manager interacts with the beneficiary  The Trust Protector oversees the Trustee and Care Manager from a distance and can replace either for any reason Trustee Care Manager Trust Protector 49

50.  Professional care management has given peace of mind to many of our families  I have seen our beneficiaries clinically improve by incorporating a care manager into their estate plan 50

51.  I have found that the utilization of a Professional Care Manager is the key to serving the Beneficiary and protecting the Trustee 51

52. Many families focus only on death planning, but they really need to focus on life planning 52

53. Anyone can join our group at any point in life. In this way, the Disability Rights Movement doesn't discriminate. 53

54. I want to provide for myself and my loved ones during my lifetime, and upon my incapacity or death give what I have to who I want, the way I want, when I want, and if I can save every last fee, tax or court cost possible. From Loving Trust 54

55.  Martha is 75 years old and lives with her 45 year old daughter Helen  Helen has Downs Syndrome and has been living with her mother since birth 55

56.  Helen is very dependent upon her mother  Martha recently spent a week in the local hospital  Both mother and daughter are concerned about what would happen upon Martha’s death or incapacity 56

57.  All too often Estate Planning is seen as death planning – but what if the parent/advocate can no longer be there?  Have the care manager do an assessment before the Trust matures  Often identify needs  Lets the Beneficiary meet the Care Manager before a crisis  Allows the parent peace of mind to see the plan in action 57

58.  Set budgets – manage expectations  Decrease the need for appointment of a Guardian Ad Litem by the courts  Determine the value of a caregiver’s services  Advise on the advisability of purchase of a residence 58

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63.  Who the heck knows?  Two schools of thought 1. Minimalist view 2. Plan as a safety net  Insurance may be a good funding mechanism to fill gaps  Qualified plans may offer a good alternative with good or bad tax consequences – great opportunity for the tax professional 63

64.  Also known as Supplemental Needs Trust  Used to supplement, but not replace public benefits  Created or codified by changes to Medicaid law contained in the Omnibus Budget Reconciliation Act of 1993 (OBRA-93)  Highly dependent on state implementation of the law 64

65.  Created by donor who wants to gift money to individual without interrupting public benefits.  Established by third party and funded with third party’s assets  Excluded from OBRA-93 definition of a trust and therefore not a countable resource 65

66.  Donor establishes a standalone SNT  Established and funded as standalone trust by third party and with third party funds  Can be used to coordinate testamentary gifts from family members  Grandparents can name standalone third party SNT rather than creating another separate SNT in their own will 66

67.  No payback provision (would be required if child received gift outright and had to create first party SNT)  One trustee and simpler trust administration  Donor can decide who will receive any funds not used to supplement the needs of the child with a disability 67

68.  Combine special needs planning with tax planning;  Know Grantor Trust Rules;  Does not mean the beneficiary will ever access public benefits - leverage what may be available;  Do not use “crummy trust” with special needs beneficiary;  Understand IRA issues with special needs trusts. 68

69.  Affluent Clients with disabled loved ones are excellent candidates for planned giving  Special Needs Trusts and Charitable Lead Trusts make excellent planning tools  Example of Stepped Lead Trust – income interest to charity, remainder to Special Needs Trust 69

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71.  California’s social service providers need your support more than ever before  Many programs are receiving less donations because of the economy at a time of increased need  Many Californians are unaware of the importance of community social service programs 71

72.  Programs that rely solely on government assistance may be phased right out of the system  To expect that the government will provide adequate resources for your disabled loved one could be a mistake 72

73. Successful planning will include:  Having the right team of advisors to advocate for the needs of your disabled loved one  Making sure your plan has the flexibility to deal with issues in a changing environment 73

74.  Our social service system is struggling and the private sector is filling the gap  Social Service Trusts can be good business  Must have systems in place  Care Managers are often the key to coordinating advocacy  Social service programs like the ARC of Contra Costa County need financial support to continue to serve our most vulnerable citizens 74