05/07/13 INTRODUCTION TO SUPPLEMENTAL NEEDS TRUSTS

Transcription

1 05/07/13 INTRODUCTION TO SUPPLEMENTAL NEEDS TRUSTS

2 What is a Trust? Under a trust, a person (the grantor ) gives title to property to another person (the trustee ), to manage and use the property for the benefit of one or more other people (the beneficiaries ). The trustee may only manage and use the property in the ways described in the trust document.

3 PURPOSES OF TRUSTS In addition to planning for needed benefits, a trust may be used: To hold property for the benefit of a person who does not manage property well; may avoid need for guardianship. As a way for the grantor to plan for and control future use of the property. To provide flexibility to deal with future changes.

4 REVOCABILITY A trust may be revocable or irrevocable. A revocable trust gives the person who created it power to pull assets out of the trust for any reason. A revocable trust can include restrictions on withdrawals, e.g., a waiting period, or a restriction on withdrawals during a period of incapacity. Assets in an irrevocable trust can only be paid out by the trustee, as directed by the trust.

5 THIRD PARTY TRUST A third-party trust is a trust funded with assets that did not belong to the beneficiary usually assets of family members or friends. Assets are given to the trust by a living gift, a gift in a will, or by beneficiary designations.

6 SELF-FUNDED TRUST A trust is self-funded if it is funded with assets that belong to the beneficiary at the time the asset are transferred to the trust. A self-funded trust can be revocable or irrevocable. A self-funded trust may be used by a person who wants to plan ahead for future incapacity or death, or who wants to have someone else manage his or her funds.

7 MANDATORY TRUSTS A trust may direct that the trustee pay money directly to the person. A trust may direct a trustee to make certain types of payments for, e.g., education, support and health care.

8 SUPPLEMENTAL NEEDS TRUST A Supplemental Needs Trust is a trust written so that trust property is not countable as assets of the beneficiary for purposes of public benefit programs, and so that distributions from the trust do not count as income. The beneficiary of a supplemental needs trust must have no power: To demand a distribution of cash, or To direct that trust assets be used to pay for his or her own support.

9 SNTS TYPICAL PROVISIONS Supplemental needs often provide that: Trustee should supplement, rather than replace, benefits available from public benefit programs. Trustee has broad discretion to make (or not make) distributions. Most (or all) distributions should be payments directly to providers of goods or services, not payments of cash to the beneficiary.

10 SNTS OPTIONAL PROVISIONS A supplemental needs trust may provide: Discretion for the trustee to make distributions that replace public benefits, to get goods or services of a type or quality not provided by public benefits. Discretion for the trustee to provide support. Discretion for the trustee to give cash to the beneficiary.

11 TRUSTS AND SSI/MEDICAID

12 Resources and Income for SSI/Medicaid: Definitions A RESOURCE IS ANY COUNTABLE MONEY OR PROPERTY THE PERSON OWNED AT THE BEGINNING OF THE MONTH, IF IT CAN BE USED FOR FOOD OR SHELTER INCOME IS ANY COUNTABLE MONEY OR PROPERTY THE PERSON RECEIVES DURING THE MONTH, IF IT CAN BE USED FOR FOOD OR SHELTER

13 Resources that Do NOT Affect SSI/Medicaid A home of any value Household goods/personal effects Medical/Adaptive equipment A car or van, if used to get to work or to medical care Wedding or engagement ring Resources essential to selfsupport Cash value of life insurance, up to $1,500 face value Burial account/trust Burial space, marker, container, vault Property in a Plan to Achieve Self- Support

14 People (or Trusts) Can Pay For: Medical expenses not covered by Medicaid Education or vocational programs Social and other services Guardianship/Advocacy costs Transportation tickets/travel expenses Excluded Resources Property for trade/business Donation to Plan to Achieve Self-Support Phone bill/cable TV Clothing and other personal items Loans WITHOUT AFFECTING SSI/MEDICAID BENEFITS

15 SSI/Medicaid Treatment of SNT Assets Property in a trust (third-party or self-funded) does not count as an asset for SSI or Medicaid if the person has no power to require the trustee to give the person cash, or to pay for the person s basic support (food or shelter). Self-funded trusts must meet additional requirements. A trust is not an asset just because it permits use of trust assets for support.

16 SSI/Medicaid Treatment of Income Paid into an SNT Income paid directly to a discretionary supplemental needs trust does not count as income for the beneficiary for Medicaid and SSI. (But it may be income for income tax purposes.) If the person or a court irrevocably assigns income to the trust, it no longer counts as his or her income. The effect of irrevocable assignment of income in Wisconsin is not clear.

17 Self-Funded Trusts under SSI/Medicaid A self-funded SNT (other than a pooled trust) is not an asset of a person with a disability if it Was established by a parent, grandparent, guardian or court for a person with a disability under age 65; Is for the person s sole benefit; AND Has a Medicaid-Payback clause, saying that any property left in the trust at the person s death will be paid to the state, up to the amount of Medicaid benefits the person has received. (These requirements do not apply to third-partyfunded trusts.)

18 Self-Funded Pooled Trusts under SSI/Medicaid Assets of a self-funded pooled supplemental needs trust account (like a WisPACT Trust I account) are not countable if The pooled trust is managed by a nonprofit organization; The account was established by the person, a parent, a grandparent, a guardian, or a court; The account is for the sole benefit of a person with a disability; AND Funds left in the account at the person s death remain in the trust to benefit other people with disabilities, or to pay back the state for Medicaid.

19 Treatment of Distributions by SSI/Medicaid Cash payments to the person count as income for SSI or Medicaid. Payments for the cost of services and of items that are not countable as resources (other than a home) do not count as income for SSI or Mediciad. Payments for food and for certain defined shelter costs count as income for SSI. Medicaid does not count in-kind income.

20 POWERS AND DUTIES OF TRUSTEE Trustee has title and control of assets. Trustee has a legal duty as a fiduciary to use trust assets only for the beneficiaries, and only as directed by the trust document. Trustee has a duty to invest resources prudently. Trustee must keep trust assets separate, and account for income and distributions. Trustee with discretion must not abuse it.

21 Who Should Be Chosen as Trustee? Person may prefer a family member or friend who knows the person well Family members may serve without a fee; banks often charge minimum fees on smaller trusts. Person may prefer a neutral third party. Putting a family member between person and money may hurt family relationships. Pooled trusts (like WisPACT) have expertise in working with people who rely on SSI and Medicaid & smaller fees on smaller trusts.