Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Special Needs Trusts and Guardianships: Protecting Government Benefits for the Disabled Crafting and Administering First- and Third-Party Trusts and Addressing the Interplay Between SNTs and Guardianships THURSDAY, DECEMBER 20, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Michael J. Keenan, Attorney, Keenan Law, Glastonbury, Conn. Beth C. Manes, Counsel, Wacks & Hartmann, Morristown, N.J. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 SPECIAL NEEDS TRUSTS & GUARDIANSHIPS: PROTECTING GOVERNMENT BENEFITS OR THE DISABLED Michael J. Keenan, Esq. Keenan Law, LLC Glastonbury, CT 5

6 PRESERVATION OF GOVERNMENT BENEFITS 1. General support trusts not appropriate 2. Informal approach not appropriate 3. Update beneficiary designations 4. Inter vivos trust preferred 6

7 DISTINGUISHING CHARACTERISTICS OF A SPECIAL NEEDS TRUST 1. Beneficiary has no control over trust 2. Trust will supplement, but not replace government benefits 7

8 TWO TYPES OF SPECIAL NEEDS TRUSTS 1. Third-party trust 2. Self-settled trust ("D4A" Trust) 8

9 TRUSTEE CONSIDERATIONS 1. Financial management experience 2. Good bookkeeping 3. Understands trust provisions 4. Has sound judgment & discretion 5. Genuinely interested in beneficiary's wellbeing 6. Discuss conflicts of interest 7. Provide a Letter of instruction 8. Consider a trust protector 9. Consider a professional trustee 9

10 PUBLIC BENEFITS CONSIDERATIONS 10

11 DEFINITION OF "DISABILITY" 1. Substantial gainful activity is not possible 2. Physical or mental impairment 3. Condition will result in death or last for at least 12 months 11

12 PROGRAMS THAT DO NOT HAVE ASSET/INCOME LIMITATIONS 1. Medicare 2. Social Security Disability Insurance (SSDI) 12

13 MEDICAID 1. Categorical eligibility 2. Asset limitation 3. Exempt assets 4. Spend-down 5. Gifting not allowed 13

14 SUPPLEMENTAL SECURITY INCOME (SSI) 1. Monthly cash payments 2. Eligibility requirements similar to Medicaid (except gifting) 3. Effect of income 14

15 TAX ISSUES 15

16 INCOME TAX 1. Third-party special needs trust 2. Self-settled special needs trust 16

17 GIFT TAX 1. Irrevocable third-party special needs trusts 2. Revocable third-party special needs trusts 17

18 ESTATE TAX 1. Third-party special needs trust 2. Self-settled special needs trust 18

19 Guardianship and Special Needs Trusts Beth C. Manes, Esq. 19

20 Guardianship Varies from state to state Guardianship v. Conservatorship Some states have adopted the Uniform Guardianship and Protective Proceedings Act (UGA) 20

21 Guardianship Who needs a guardian? UGA definition of incapacity: unable to receive and evaluate information or make or communicate decisions to such an extent that the individual lacks the ability to meet the essential requirements for physical health, safety, or self-care, even with appropriate technological assistance. UGA 102(5). 21

22 Guardianship Who should be the guardian? Things to consider: Is the ward a minor? Location of ward and proposed guardian. Physical and emotional needs of the ward. Age of the proposed guardian. 22

23 Guardianship How broad should guardianship be? Person Property Limited 23

24 Guardianship Procedure under the UGA 1. Petition 2. Personal Service 3. Visitor 4. Evaluation a) Guardianship b) Conservatorship 5. Hearing 24

25 Guardianship Burden of Proof To establish guardianship or conservatorship: clear and convincing evidence To remove guardianship or conservatorship: prima facie evidence If possible, ward can give consent 25

26 Guardianship Monitoring under the UGA Guardians: 30 days then annually Conservators: must file a plan and an inventory within 60 days then annual reports Both guardian and conservator must make recommendations as to whether the guardianship or conservatorship should be continued or modified Bond may be required 26

27 Guardianship Duties of Guardian Decisions regarding health, education, maintenance and support Ward shall participate in decisions to the extent possible Guardian shall consider values and desires of ward 27

28 Guardianship Duties pursuant UGA 314(a)-(b) To become or remain personally acquainted with the ward and maintain sufficient contact with the ward to know of the ward s capacities, limitations, needs, opportunities and physical and mental health. To take reasonable care of the ward s personal effects and bring protective proceedings if necessary to protect the property of the ward. 28

29 Guardianship Duties pursuant UGA 314(a)-(b) To expend money of the ward that has been received by the guardian for the ward s current needs for support, care education, health and welfare. To conserve any excess money of the ward for the ward s future needs, but if a conservator has been appointed for the estate of the ward, the guardian shall pay the money to the conservator, at least quarterly, to be conserved for the ward s future needs. 29

30 Guardianship Duties pursuant UGA 314(a)-(b) To immediately notify the court if the ward s condition has changed so that the ward is capable of exercising rights previously removed. To inform the court of any change in the ward s custodial dwelling or address. 30

31 Guardianship Powers pursuant UGA 315(a) Apply for benefits, both public and private Take custody of and establish residency for ward If conservator has not been appointed, Guardian may initiate action to compel a person to support the ward Consent to medical care, with some limitations 31

32 Guardianship Powers pursuant UGA 315(a) Consent to marriage or divorce Delegate certain responsibilities to the ward Consent to adoption of the ward. 32

33 Guardianship Rights pursuant UGA 316(a)(b) Reasonable compensation Reimbursement Not liable for acts of ward 33

34 Guardianship Reports pursuant UGA 317(a)-(b) Ward s participation in decisions and the need for continuing guardianship; Living arrangements; Services provided to the ward (including but not limited to medical educational); Activities of guardian (including visits with ward); If ward is institutionalized, guardian s opinion as to appropriateness; Plans for future care; Opinion as to need for, or recommended changes to scope of, guardianship. 34

35 Conservatorship Difference between guardianship and conservatorship Responsible for financial decisions Must maintain fiduciary accounts (separate from other wards) Inventory of assets Annual accountings 35

36 Conservatorship Be wary of ward who wants to maintain some control Small allowance Bank card Gifting Estate planning Medicaid planning 36

37 Special Needs Trusts Self-settled person must be disabled Third-party can be in anticipation of disability Pooled/Community 37

38 Self-settled Trusts To qualify for exclusion from being counted as asset of beneficiary (pursuant to U.S.C. 1396(d)(4)(A): Trust must be for the benefit of one individual who is: Disabled Under the age of 65 38

39 (cont d) Trust must be established by the parent, grandparent, or guardian of a disabled person or by the court; Trust must be irrevocable; 39

40 (cont d) Trust must give the trustee sole and absolute discretion over the use of corpus and income of the trust; and Trust must provide for repayment to the state of money paid for the benefit of the beneficiary pursuant to the state s Medicaid plan. 40

41 Pooled Trust To qualify for exclusion from being counted as asset of beneficiary (pursuant to U.S.C. 1396(d)(4)(C): Trust must contain the assets of a disabled individual; Trust must be both established and managed by a nonprofit association; 41

42 (cont d) Trust must be treated as a separate trust for accounting purposes, but be pooled with assets held for other beneficiaries for investment and management purposes; Trust must include a separate account established for the individual beneficiary by his or her parent, grandparent, guardian, court or him/herself; 42

43 (cont d) Trust must provide for repayment to the state for Medicaid payments to the extent that money remains in the account upon the beneficiary s death are not retained by the trust. Interpretation varies from state to state. 43

44 Third-party Trusts Created by one person for the benefit of another and funded exclusively with assets not belonging to the beneficiary. No pay-back provision is necessary. Should be purely discretionary: Prohibit trustee from making distributions directly to beneficiary Direct trustee to consider effect of distributions on public benefits eligibility. 44

45 Distributions from Special Needs Trusts Stricter for self-settled than for third-party. Beware of in-kind support and maintenance (ISM). 45

46 Permissible Distributions from Special Needs Trusts Non-covered medical expenses Vehicle Burial space, prepaid funeral Clothing and personal items Travel Educational, vocational, social and personal services. 46

47 Practice Tips Guiding the client to select a trustee Separate memorandum giving guidance to trustee not part of document Incorporating special needs planning into estate planning Special considerations in divorce context 47