Special Needs Trusts Seminar

Transcription

1 Presenters * John A. Rule, Miller, Turetsky, Rule & McLennan * Justin Bartolomucci, Edward Jones Special Needs Trusts Seminar 9/20/11 1

2 This Presentation will focus on the use of trusts in estate planning involving persons with disabilities. Primarily, our focus will involve two distinct trusts: a trust intended to hold family funds and another that can hold funds of the person with a disability. 10/02/09 2

3 Main objectives of good planning: Assets held for exclusive benefit for life; Assets will not be resources; No public benefits placed at risk; Flexibility wherever possible. 10/02/09 3

4 Some Public Benefits are means-tested and will be lost if the person has resources SSI and Medicaid Benefits are the two most important means-tested benefits. Asset resource ceilings can be as low as $2,000 and not more than $8, /02/09 4

5 Important to project into the future. Many persons not presently receiving meanstested benefits may need them in the future. If this turns out to be the case, it may be too late to complete the planning at that time. 10/02/09 5

6 Many persons can be dual eligibles. In younger age they may receive Social Security Disability Income (SSDI) which is not means-tested and may qualify for Medicare (also not means-tested). After death of parent(s) residential care programs will likely be Medicaid funded and means-tested 10/02/09 6

7 Intended to hold assets contributed by family (parents) or other third parties (not hold any assets of the person receiving government benefits.) Can be established in a will or as a free-standing lifetime created trust (that can also receive further funding from a will.) 10/02/09 7

8 Key to effectiveness is that Trustee is granted complete discretion to expend or not to expend funds for the beneficiary. This absolute discretion imposed over assets not originating with the beneficiary keeps them from being deemed resources. 10/02/09 8

9 Pennsylvania Supreme Court ruled in favor of this type of trust (and against DPW) over 30 years ago so there is long-standing precedent. 10/02/09 9

10 Created and funded in will of surviving parent. Created lifetime and funded with lifetime gifts, with additional funding by will. Life insurance on both parents, or a second to die policy with the SNT as beneficiary can create instant funding. 10/02/09 10

11 Trustee has flexibility to use funds for any purpose that will not cause a loss of benefits. When means-tested benefits are not being received, trust can provide more benefits. If means-tested benefits are in play distributions can be scaled back as needed. 10/02/09 11

12 Any balance remaining at the death of beneficiary can be made payable to other remainder beneficiaries. 10/02/09 12

13 Intended to hold assets of person who is disabled according to Social Security definition. May not be established by the person himself or herself, but may be created for the person by parents, grandparents; court appointed guardian, or by order of court. 10/02/09 13

14 May not be created or funded after beneficiary is age 65. but distributions may continue from an established trust. Eligible distributions more limited than Third Party SNT may only be for items related to disability or ameliorative of the disability. 10/02/09 14

15 Any balance remaining in trust at death of beneficiary must be paid to DPW to the extent of Medicaid benefits provided to the beneficiary. 10/02/09 15

16 Good to consider creating First Party SNT along with Third Party even if means-tested are not immediate issue and even if substantial assets are not presently owned by beneficiary. May not have or ability to do so in a future emergency. First Party Trust can be a stand-by trust that will still be available to shelter benefits if needed. 10/02/09 16

17 For needs related to disability fund these from the First Party Trust and use the Third Party trust for the broader needs of the beneficiary. Care must be taken to avoid direct distributions to any beneficiary receiving means-tested benefits make distributions for the benefit of 10/02/09 17

18 It is no longer necessary to consider disinheritance or informal trusts funded through gifts to other family members as the only way to effectively plan for a beneficiary with a disability. Special needs trusts can avoid a loss of valuable governmental benefits while holding assets for the exclusive benefit of the beneficiary. 10/02/09 18