Third Party Special Needs Trusts or Pooled Income Trusts? Which should the attorney recommend?

Transcription

1 Third Party Special Needs Trusts or Pooled Income Trusts? Which should the attorney recommend? Martha C. Brown Martha C. Brown & Associates, LLC 220 W. Lockwood, Suite 203 St. Louis, Missouri (314)

2 Third Party Special Needs Trusts Testamentary Stand Alone 2

3 Testamentary Third Party Special Needs Trust If SNT for a spouse receiving MO HealthNet for nursing home care, trust must be testamentary (i.e. in a will) 42 U.S.C p(d)(2)(a) 3

4 Testamentary Third Party Special Needs Trust If funding of Special Needs Trust with inheritance and/or life insurance Commonly used for joint/survivor annuitant life insurance 4

5 Testamentary Third Party Special Needs Trust Downside to its use Subtrust of a revocable trust Not in existence until settlor s death Cannot be used as a receptacle for a parent s nursing home MO HealthNet planning 5

6 Stand Alone Third Party Special Needs Trust Immediately available to receive assets from anyone other than the beneficiary Available to be a beneficiary of moneys from various family members who want to assist the family member who is disabled Family Angels 6

7 Stand Alone Third Party Special Needs Trust Communication of trust s existence is critical Its existence enables child with a disability to receive moneys from a grandparent who desires to treat all grandchildren alike instead of: 529 Plan Donation Uniform Gift to Minor 7

8 Which kind of Third Party Special Needs Trust? The Analysis Does trust beneficiary need the assistance of trust now or in the future? Is the trust beneficiary disabled, yet competent? Does beneficiary receive SSDI or SSI 8

9 Which kind of Third Party Special Needs Trust? The Analysis Will the trust beneficiary use MO HealthNet for basic health services or will trust beneficiary use an exchange health insurance policy? 9

10 Which kind of Third Party Special Needs Trust? The Analysis Is the trust beneficiary a named beneficiary of an IRA or 401(k) retirement account? Is the trust beneficiary easily influenced or a fragile and vulnerable adult? 10

11 Pooled Income Trusts When would a Pooled Income Trust be Preferable to a Third Party Special Needs Trust? 11

12 Pooled Income Trusts Selection of a trustee Does Jim want to be a Trustee of a Third Party Special Needs Trust for his bi-polar brother? 12

13 Pooled Income Trusts Expertise of the Trustee of the Pooled Income Trust Access to sophisticated knowledge about: Disabilities Government benefit programs Use of Third Party Trustee Fees lower than most trust companies 13

14 Pooled Income Trusts Expertise of the Trustee of the Pooled Income Trust Preferred beneficiaries Trust companies/trust administrators Many dislike special needs trusts, which are harder to administer 14

15 Pooled Income Trusts in Missouri Midwest Special Needs Trust ARCare 15

16 Other National Pooled Income Trusts Secured Futures Center for Trust Administration National PLAN Alliance Life s Plan, Inc. 16

17 Pooled Income Trusts Retention Policy of Residuary after Death of Trust Beneficiary 42 U.S.C. 1396p(d)(4)(c) Permits the Pooled Income Trust to retain the corpus of the trust account at the death of the trust beneficiary 17

18 Pooled Income Trusts Retention Policy of Residuary after Death of Trust Beneficiary Some Pooled Income Trusts retain 100% Some retain less Midwest Special Needs Trust retains 25%, after the Medicaid payback clause is satisfied, if necessary For its Charitable Trust 18

19 Pooled Income Trusts Medicaid payback is thwarted if remainder sums are retained by the Pooled Income Trust Midwest Special Needs Trust does not adhere to that 19

20 QUESTIONS Martha C. Brown Martha C. Brown & Associates, LLC 20