POOLED SPECIAL NEEDS TRUSTS. Future planning for your loved one with a disability

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1 POOLED SPECIAL NEEDS TRUSTS Future planning for your loved one with a disability NOVEMBER 5, 2015

2 Presenter Cheryl Carlyon, MBA Marketing and Outreach Manager Commonwealth Community Trust National nonprofit organization that administers Pooled Special Needs Trusts for individuals with disabilities. 25 years of experience Since our founding in 1990, CCT has served over 1,190 Beneficiaries and currently manages more than $39 Million in funded trusts.

3 Agenda Why consider a Special Needs Trust Benefits of a Special Needs Trust Terminology Role of Trust Administrator/Trustee The Pooled Special Needs Trust Option Two types of Trusts: Third-Party and Self-Funded Disbursements / How can the trust be used? Reasons to Consider a Pooled Special Needs Trust with CCT Next steps Questions

4 Why consider a Special Needs Trust? When might an individual receive a large sum of money? Inheritance Personal injury award Other situations? Family may have special concerns when that individual has a disability: Does my loved one need help managing the funds? Does my loved one need to maintain eligibility or qualify for Medicaid and/or Supplemental Security Income (SSI)? Can I include specific instructions as to how the trust is to be utilized for my loved one?

5 Benefit #1 of a Special Needs Trust Benefit #1 Fiduciary Oversight If you are concerned that your loved one may need help managing funds, a Special Needs Trust will put into place a Trustee who has responsibility of making sure funds for your loved one are (among other things): 1) used for his/her sole benefit 2) properly managed/invested 3) spent prudently

6 Benefit #2 of a Special Needs Trust Benefit #2 Public Benefits Eligibility IMPORTANT! To qualify for these benefits, an individual cannot have over $2,000 in countable assets. A special needs trust will allow for funds to be available that will not count as a resource (assets or income) for means-tested benefits.

7 Benefit #3 of a Special Needs Trust Benefit #3 Advocacy/Instructions Establishing a special needs trust is an opportunity for you to seriously consider how your loved one s life may change in the future, and to give instructions about his or her care, living arrangements and other needs that must be met.

8 Terminology Beneficiary: the trust is for the benefit of Grantor: the person or persons establishing the trust Trustee: person or entity that has fiduciary responsibility. Trust Administrator: provides administrative services for the trust Revocable: ability to revoke trust Irrevocable: no option to revoke trust

9 Role of Trust Administrator/Trustee Utilize the funds for the Sole Benefit of the Beneficiary Keep the best interest of the Beneficiary in mind Understand public benefits and keep up with changing rules Invest the trust assets wisely and follow fiduciary requirements Maintain accurate accounting WHO IS RIGHT FOR THE JOB? Family Member Attorney Financial Institution or Bank Nonprofit Pooled Trust Organization

10 The Pooled Special Needs Trust Option Operated by a nonprofit organization that specializes in providing trust administration for individuals with disabilities Oversight by a Board of Directors Partnership with an investment firm, bank or individual investment professional to manage and invest trust funds CCT partners with The Trust Company of Virginia who manages and invest the funds. Funds are pooled together for investment purposes Individual accounting is kept for each Beneficiary s sub account CCT currently administers more than $39 Million in funded trusts.

11 The Pooled Special Needs Trust Option Makes disbursement decisions Income and principal from the trust are distributed on behalf of the Beneficiary Attention given to protect Medicaid and SSI if a Beneficiary receives these benefits Staff is knowledgeable about rules regulating SSI and Medicaid benefits and stay current on any changes Staff is sensitive to the needs of individuals with disabilities, given its mission and purpose as a nonprofit organization

12 The Pooled Special Needs Trust Option Accepts cash / checks as the funds are pooled and invested together Provides access to financial statements for review by the responsible party CCT offers options for Advocates to receive statements via mail or online access. Annually distributes the Schedule K-1 tax form for each Beneficiary s sub account Available for Court qualification and provides Court accounting, when required

13 The Pooled Special Needs Trust Option Enrollment Fees At time the trust is established Enrollment Fee for CCT s Third-Party Special Needs Trust is $850. Enrollment Fee for CCT s Self-Funded Pooled Disability Trust is $1,250. (Note: see slide #14 for more information about the two types of trusts.) Lower Ongoing Administrative Fees Once trust is funded, these fees apply. CCT/TCVA combined fees are currently 0.84% per year, prorated on a monthly basis. Fee Schedules available on the CCT website Low funding requirements / No maximum Trust accounts vary from modest to substantial. CCT s minimum funding requirement is $5,000.

14 Two Types of Pooled Special Needs Trust Third-Party Special Needs Trust Grantor(s) can be a parent, grandparent, other family member or third-party individual(s). Funds from family member(s) or friend(s) for the Benefit of the Beneficiary in Estate Plans, Wills, Life Insurance Policies, Retirement Accounts, Bank Accounts, etc. Revocable until funded as long as the Third- Party Trust is unfunded (if situation or wishes change,) the trust can be revoked. Once funded, it is irrevocable. No Age Limitation NOT subject to Medicaid payback Self-Funded Pooled Disability Trust Grantor can be the Beneficiary, the Beneficiary s legal guardian, parent, or grandparent, or Court. Funds belong to the Beneficiary, usually from a personal injury or workers compensation award, direct inheritance, the Beneficiary s own funds or Social Security back payment. Irrevocable (by law) Age Limitation: In some states, a transfer of assets penalty may apply if the Beneficiary is 65 years old or older. Subject to Medicaid payback (for a Beneficiary that received Medicaid) Note: An individual can have both types of trusts.

15 Third-Party v. Self-Funded Trusts The basic difference: Whose assets are funding the trust? Example 1 A father wants to establish a trust for his child with a disability that will be funded through his life insurance policy. The parent includes language in the policy to leave funds to the Special Needs Trust for the benefit of his child.

16 Third-Party v. Self-Funded Trusts The basic difference: Whose assets are funding the trust? Example 1 A father wants to establish a trust for his child with a disability that will be funded through his life insurance policy. The parent includes language in the policy to leave funds to the Special Needs Trust for the benefit of his child. Funds belong to the parent: THIRD-PARTY

17 Third-Party v. Self-Funded Trusts The basic difference: Whose assets are funding the trust? Example 2 An individual who was disabled due to an accident is receiving funds from a personal injury award settlement.

18 Third-Party v. Self-Funded Trusts The basic difference: Whose assets are funding the trust? Example 2 An individual who was disabled due to an accident is receiving funds from a personal injury award settlement. Funds belong to the individual: SELF-FUNDED

19 Third Party v. Self-Funded Trusts The basic difference: Whose assets are funding the trust? Example 3 A well-meaning grandfather has left an inheritance in his will to his grandson who has a disability and receives SSI and Medicaid benefits. The grandfather passed away, and the Executor is disbursing the grandson s portion of the estate. A special needs trust needs to be established in order to retain the grandson s public benefits.

20 Third Party v. Self-Funded Trusts Example 3 The basic difference: Whose assets are funding the trust? A well-meaning grandfather has left an inheritance in his will to his grandson who has a disability and receives SSI and Medicaid benefits. The grandfather passed away, and the Executor is disbursing the grandson s portion of the estate. A special needs trust needs to be established in order to retain the grandson s public benefits. Funds belong to the grandson: SELF-FUNDED TRUST The inheritance was left directly to the grandson. Why? Either a) A Third-Party Special Needs Trust was not set up in advance. b) Or the Beneficiary designation language in the will was not corrected to direct funds to the Third-Party Special Needs Trust.

21 Best-Practices Criteria for Disbursement Decisions Whether the request would jeopardize benefits (SSI and Medicaid) Whether the request is for the sole benefit of the Beneficiary which is most important for SSI and Medicaid recipients Whether the request is prudent Whether the request is consistent with the intent of the Grantor, when appropriate Whether the request is consistent with Objectives and Budget sent by the Beneficiary or Advocate

22 What can the trust pay for? Examples include, but are not limited to: Medical and Dental Services not covered by insurance and/or Medicaid Caregiver Expenses Eyeglasses, Hearing Aids, and Prosthetic Devices Burial Plot and Pre-paid Burial Expenses Computer and Internet Services Educational Expenses Television and Telephone Clothing Home Improvements and Furniture Vehicle & Transportation

23 Disbursement Procedure Advocate(s) is named in the Joinder Agreement who works directly with CCT to request disbursements and share information about Beneficiary who has a disability. The Advocate(s) can be: Beneficiary Family Member (Parent, Sibling or Relative) Guardian Power of Attorney Conservator Caseworker Other Representative

24 Disbursement Procedure Payment Request Form with required signatures from the Advocate Payable to: Payable to vendors Payable to Advocate for allowable reimbursements No cash payments directly to Beneficiary if he/she receives SSI/Medicaid More flexibility if Beneficiary does not receive SSI/Medicaid Credit Card option offered by CCT based on user agreement 24

25 Reasons to Consider a Pooled Special Needs Trust with CCT A professional trust administrator with 25 years of experience working with individuals with disabilities and their representatives Affordable, comprehensive services with low administrative fees Accounts can be small or quite large and all accounts benefit from having the funds pooled for investment purposes Knowledgeable about the current rules and regulations governing the disbursements of funds so as not to jeopardize SSI or Medicaid benefits Provides objective oversight to ensure funds are properly spent and managed Available Nationwide

26 Next steps 1. Determine what resources will fund the trust. 2. Meet with an estate planning attorney familiar with special needs planning. 3. Update all Beneficiary designations and notify anyone who may leave your loved one an inheritance/monetary gift. 4. Revisit the trust periodically or if your family situation changes.

27 Next steps Documents needed to establish a Pooled Special Needs Trust with CCT: 1. Joinder Agreement legal document required to join 2. Fee Schedule that details the enrollment fees and ongoing administrative fees 3. Family and Beneficiary Information / Objectives of the Trust Though not required, it can be very helpful when CCT is making disbursement decisions on behalf of the Beneficiary. This is similar to a letter of intent. Note: All trust documents and fee schedules are available on the CCT website. 27

28 A Parent s Point of View While all parents want their children s futures to be as bright as possible, it is even more worrisome and important when the child has a disability. By creating a [Pooled] Special Needs Trust for our son with Down syndrome, not only have we helped to ensure more opportunities for him after we are gone, but we also have not made him a significant financial burden for his siblings and relatives. Harry Gewanter, MD Richmond, VA

29 Questions? Contact CCT with questions or for more information. Joanne Marcus, MSW Executive Director (804)