Patti's Blog - Advocate for Elders, People with Disabilities and Their Families

Good News for Trustees, Beneficiaries of Special Needs Trusts

Excerpt from: Raymon B. Harvey, P.A. (click for full article)

 

The changes last fall addressed several sections of the POMS dealing with how to treat expenditures from special needs trusts. Some of the changes focused on just “self-settled” special needs trusts, others included expenditures by “third-party” special needs trusts and perhaps even payments by family members or others who try to help recipients of Supplemental Security Income (SSI).

Among the changes posted last fall:

When family members paid for items for a trust beneficiary — like medical supplies, clothing, transportation or pretty much anything else — reimbursement from a trust would be treated as income to the beneficiary, even though nothing ever went through the beneficiary’s hands or account. The same would have been true for trust payments to the family member’s credit card.

Payments for caregiving could not be made to a family member unless the family member was certified in some way.  

Travel expenditures for third persons to visit a trust beneficiary would have been prohibited in pretty much all circumstances.

Trusts are not just for the wealthy

Excerpt from: Sea Coast Online (click for full article)

 

When I talk with couples about estate planning, a frequent question is whether they have enough assets to warrant the use of trusts.

Trusts have long been considered a tax-saving tool for the wealthy. Now that Congress has increased the federal estate tax exemption to $5 million and made that exemption portable for spouses, including trusts in an estate plan may seem to be overkill. Benefits other than estate tax reduction, however, often tip the scales in favor of trusts, even for couples with smaller estates.

A trust is an alternative to individual or joint ownership as a means for owning property. The person establishing the trust, known as the grantor, transfers assets to a trustee, who is charged with managing the property for a beneficiary according to the terms of the trust document. When a revocable living trust is part of an estate plan, the grantor, trustee and beneficiary are often the same person. Because the trust will also specify a successor trustee, the grantor is assured the assets will continue to be managed for his benefit should he become unable to manage his financial affairs on his own.

World War III of Probate Litigation Embroils a Multitude of Law Firms

Excerpt from: The Recorder (click for full article)

 

When it comes to Herbalife, nothing seems to come without drama. Expensive, bitter drama.

Even as hedge fund titans wage a high-profile battle over the nutrition company and its finances, five law firms are heading to the First District Court of Appeal this month to wage a $3 million fee fight in what's been called the World War III of probate litigation.

On one side are business litigation firm Mitchell Silberberg & Knupp and solo practitioner Hillel Chodos. They're demanding payment for guarding the interests of Alexander Hughes, 21-year-old heir to a $400 million fortune bequeathed by Herbalife founder Mark Hughes, who died of an overdose in 2000.

On another side are the trustees, who say Mitchell Silberberg assigned 41 attorneys to the task of unseating them and failed. Even bringing in Chodos, who billed $1,000 an hour without keeping time records, didn't help their cause, say the trustees' lawyers at Akin Gump Strauss Hauer & Feld. What's more, they contend that Mitchell Silberberg and Chodos never cared about young Alex's interests. In reality, Akin Gump says, they were doing the bidding of his mother and guardian, Suzan Hughes, who's trying to wrest control of the trust for her own purposes after obtaining some $14 million in a divorce settlement.

Special Needs Trusts

Excerpt from: Brook Clay Attorneys at Law (click for full article)

 

Proper planning is especially critical for clients who have children or other loved ones with disabilities. Attempts to set aside funds for a disabled beneficiary may render the beneficiary ineligible for public assistance to which he or she would otherwise be entitled (such as Medicaid and Supplemental Security Income). Most often, it will require a combination of family funds and public assistance to provide adequately for the lifelong comfort and care of a disabled beneficiary. Our attorneys assist clients in achieving a positive outcome in this regard through Special Needs Planning,including:

•  Special Needs Trusts - trusts which allow the trustee to expend funds for the supplemental needs of disabled beneficiaries in a manner which does not cause the loss or interruption of government benefits.
• Self-Settled Special Needs Trusts - established with the disabled beneficiary’s own funds.
• Third-Party Settled Special Needs Trusts - established with gifts or bequests from family members for the benefit of the disabled beneficiary.
• Guardianship and Conservatorship for Incapacitated Adults - grants parents or other individuals legal authority to handle the affairs of a disabled person.

Can a 529 Plan Hurt Your Medicaid Eligibility?

Excerpt from: AARP (click for full article)

 

You could have a problem if you own a 529 plan and need to apply for Medicaid. Because 529 account owners can withdraw a plan’s funds at any time, Medicaid counts the plan as the owner’s financial resource in most states. Consequently, states’ Medicaid regulations will count the plan against the asset limits you’re allowed to keep before receiving Medicaid benefits. If your assets are above the allowed limit, you’ll be forced to spend down your financial accounts—including the 529 plan—to qualify for benefits.

Each state manages its own Medicaid program and the qualifying rules are complex, so you should speak with an attorney or financial advisor before making any decisions. But there are two general strategies worth considering as you weigh your options:

Change the account’s ownership.

Have a trust control the account.

Special Needs Trusts

Excerpt from: Medicaid Answers (click for full article)

 

There are three main types of special needs trusts a person can use to protect assets:

1) The Special Needs Trust (known as a “(d)(4)(A) trust” based on its designation under federal law) is a common trust used to protect lawsuit or insurance proceeds or inheritances for someone who is disabled and needs or may need long-term care.  This trust must include a Medicaid payback provision at the death of the disabled beneficiary.

2) The Pooled Trust (authorized under (d)(4)(C)) also works similar to a (d)(4)(A) trust in that it is set up for individuals who are under 65 and disabled.  The same types of assets can be protected in them, but the pooled trust is established by a charity which runs and administers the trust for a number of disabled beneficiaries.  Some portion of the reminder is paid back to Medicaid when the disabled beneficiary dies and the rest is retained by the charity.

3) The Third-Party Special Needs Trust (often referred to as an “Amenities Trust”) is often established by parent or grandparent to leave assets in trust for the benefit of a disabled child or grandchild.  The money or assets can stay in trust and does not qualify towards what has to be spent down to achieve Medicaid or SSI eligibility.  The trust funds can be used to cover those things not covered by government assistance — referred to as amenities.  Because it is set up by a third-party, the remainder in the trust fund can pass through to other heirs or beneficiaries at the death of the disabled beneficiary.

Protecting Your Assets: Some Strategies

Excerpt from: New York Times (click for full article)

 

Most methods of saving estate taxes reduce a person’s net worth through irrevocable lifetime transfers. Yet even the very wealthy are sometimes reluctant to take this step, because they worry that it will leave them short of money, said Lloyd Leva Plaine, a lawyer with Sutherland, the Washington-based firm. Market turbulence and changing political tides exacerbate those fears.

Even if you have no estate tax concerns, strong reasons remain for creating trusts and maintaining old ones, said Steve R. Akers, managing director at the Bessemer Trust Company in Dallas. They can safeguard your assets and provide for your care if you can no longer handle your affairs; they can also hold money for minors, prevent funds from being eroded by spendthrift family members and protect assets from former spouses or someone who wins a lawsuit against you.

Because of a quirk in the current law, the estate tax is scheduled for repeal at the end of 2009. Then, after a year with no estate tax, it would return at the unfavorable rates that applied in 2001, unless Congress enacts a new plan. For 2008, the exemption amount is $2 million a person and the rate is 45 percent; the exemption increases to $3.5 million in 2009 with the rate unchanged.

Finding and Choosing a Pooled Special Needs Trust

Excerpt from: NOLO: Law for All (click for full article)

 

Joining a pooled special needs trust might be a good option for your family if you don’t have much money to leave for your loved one, or if you don’t know a suitable person to name as trustee of your trust.  Learn more about how pooled trusts work and why you might want to join one in the article Pooled Special Needs Trusts onNolo.com. Here’s how to find and choose a quality pooled trust. 

Searching for a Pooled Trust

Pooled trusts must adhere to strict state rules, so to keep things manageable, most pooled trusts only take residents that reside in the same state. To find a special needs pooled trust in your state, try contacting one of these organizations:

• Academy of Special Needs Planners: www.specialneedsanswers.com
• The Arc: www.thearc.org
• The Center for Special Needs Trust Administration, Inc.: www.sntcenter.org
• The National PLAN Alliance: www.nationalplanalliance.org

If you find a pooled trust that you’re interested in, it’s time to ask some detailed questions about how the trust will provide for your loved one.

Special Needs Require Careful Planning

Excerpt from: Krasa Law (click for full article)

 

The concern is that an inheritance will suddenly increase the special needs beneficiary’s asset level, thereby abruptly eliminating the public benefits. After the beneficiary spends through the inheritance and is once again eligible for public benefits, it might be very difficult or even impossible for the beneficiary to successfully reapply for such benefits. Furthermore, the beneficiary might not be capable of managing the inheritance and might make poor financial decisions.

The solution is to set up a “special needs trust” (also known as a “supplemental needs trust”) for the benefit of the special needs beneficiary. The special needs trust names a third party as the trustee or “manager” of the trust. The special needs trust would not allow the beneficiary to have any right to force a distribution, which makes the assets of the special needs trust exempt from being considered an “available resource” to the beneficiary. The special needs trust will typically give the trustee full discretion on whether or not to make a distribution on behalf of the beneficiary. As long as the trustee makes sure to avoid distributions for “impermissible purposes” which the public benefits are designed to cover such as food, shelter, and clothing, the distributions will also not count as a resource to the beneficiary and will not affect the receipt of public benefits. The trustee may make distributions for purposes that are not covered by public benefits, such as entertainment and travel, which will not affect the receipt of public benefits. In this regard, the inheritance can still be available to the beneficiary without eliminating public benefits.

Some Couples Might Need Separate Lawyers

Excerpt from: Wills, Trusts,& Estates Prof Blog (click for full article)

 

While a good number of couples will likely want to plan their estate plan together with only one lawyer, that might not be possible in some circumstances or a good idea in other circumstances. The following are a few situations where that might occur:

• If the clients have a blended family where the couple has children from a different marriage, then the both parents might want to obtain separate lawyers. To ensure that the children of each spouse receives the inheritance that their parent wanted them to receive, that parent might want to create an estate plan separate from the other spouse. In that case, the parent would need a separate lawyer.
• A client might also need a separate lawyer if the client is seeking a prenuptial agreement.
• There are also certain groups of people that might want to strongly consider obtaining separate lawyers because these people are not married or cannot get married, as in the case of LGBT couples. These couples need more attention because of their non-martial status.
• A person might also want to consider obtaining the services of a separate attorney if there is a dispute over the ownership of the assets of the couple.