Leveraging Special Needs Trusts g g p to Obtain Public Benefits - - PowerPoint PPT Presentation

Presenting a live 90‐minute webinar with interactive Q&A

Leveraging Special Needs Trusts g g p to Obtain Public Benefits

Crafting First Party, Third Party, and Pooled Special Needs Trusts

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNES DAY, JUNE 15, 2011

Today’s faculty features: Evan H. Farr, CELA, Farr Law Firm, Fairfax, Va. Edward Zetlin, Edward Zetlin Law, Arlington, Va. Martha C. Brown, CELA, Martha C. Brown & Associates, S

• t. Louis, Mo.

The audio portion of the conference may be accessed via the telephone or by using your computer's

• speakers. Please refer to the instructions emailed to registrants for additional information. If you

have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

Conference Materials

If you have not printed the conference materials for this program, please complete the following steps:

• Click on the + sign next to “ Conference Materials” in the middle of the left-

hand column on your screen hand column on your screen.

• Click on the tab labeled “ Handouts” that appears, and there you will see a

PDF of the slides for today's program.

• Double click on the PDF and a separate page will open.

Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

Continuing Education Credits

FOR LIVE EVENT ONLY

For CLE purposes, please let us know how many people are listening at your location by completing each of the following steps:

• Close the notification box
• In the chat box, type (1) your company name and (2) the number of

attendees at your location

• Click the blue icon beside the box to send

Tips for Optimal Quality

S d Q lit S

• und Quality

If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory and you are listening via your computer speakers, you may listen via the phone: dial 1-866-258-2056 and enter your PIN when prompted Otherwise please send us a chat or e mail when prompted. Otherwise, please send us a chat or e-mail sound@ straffordpub.com immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing Qualit y

To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again press the F11 key again.

Evan H Farr CELA Evan H. Farr, CELA

L i S i l N d T Leveraging Special Needs Trusts to Obtain Public Benefits

703-691-1888 evanfarr@farrlawfirm.com

Special Needs Trusts: Typical Clients Typical Clients

• Parents planning for a disabled child;

Parents planning for a disabled child;

• Disabled individuals coming into an
• Disabled individuals coming into an

inheritance or winning or settling a personal injury claim; or injury claim; or H l h l i f di bl d

• Healthy spouse planning for a disabled spouse.

Evan Farr, CELA | Farr Law Firm 6

The Client’s Concerns

• How to leave funds for the benefit of a child without causing

the child to forfeit important public benefits?

• How do you make sure that the funds are well managed?
• How do you make sure that other children are not over‐

burdened with caring for the disabled sibling?

• What is fair in terms of dividing the estate among a disabled

child and other children?

• How do you make sure there’s enough money to meet the

disabled child’s needs?

Evan Farr, CELA | Farr Law Firm 7

Why a Special Needs Trust?

• First, public benefits programs are often

i d inadequate.

• Second, both public benefits programs and

individual circumstances change over time.

• Third, in the situation where a parent thinks it

, p is appropriate to rely on other children to take care of the disabled sibling, an undue burden g, arises and can strain relations between them.

Evan Farr, CELA | Farr Law Firm 8

Two Primary Functions

• To manage funds for someone who may not be

bl d hi lf h lf d able to do so himself or herself due to disability.

• To preserve the beneficiary’s eligibility for

public benefits, whether that is Medicaid, Supplemental Security Income (SSI), public housing, or any other means‐based benefit program.

Evan Farr, CELA | Farr Law Firm 9

Two Main Categories

• Third‐Party SNT: one person creates and

f d f h b fi f l funds for the benefit of someone else

• First‐Party SNT: (also called d4a trusts) created

for the person with special needs using that person’s own money.

Evan Farr, CELA | Farr Law Firm 10

The General Rule

• Funds held by a self‐settled trust are

id d il bl di bl d b fi i considered available to a disabled beneficiary and render him ineligible for important b fi benefits.

Evan Farr, CELA | Farr Law Firm 11

The Two Exceptions: two types of "self‐settled" trusts self settled trusts

• Fortunately, both

(d)( )( ) ll Medicaid and SSI allow two types of "self‐ settled" trusts (also called “f ” ) h

• (d)(4)(a) Trusts – normally

for a single beneficiary; and “first‐party” trusts) that permit a beneficiary to:

• (d)(4)(c) Pooled Trusts –

where trust accounts for

– Shelter his/her own funds; – Qualify for public benefits; and

multiple beneficiaries are pooled and invested together.

and – Remain a continuing beneficiary of the trusts.

Evan Farr, CELA | Farr Law Firm 12

beneficiary of the trusts.

First Party Special Needs Trusts

• Also Known as:
• Any funds remaining in

the trusts upon the – (d) (4) (A) trust – “Pay‐back” Trust the trusts upon the beneficiary’s death be used to reimburse the – Single‐beneficiary self‐settled trust used to reimburse the State for any Medicaid expenditures it has made on the beneficiary’s behalf.

Evan Farr, CELA | Farr Law Firm 13

First‐Party vs. Third‐Party Special Needs Trusts Needs Trusts

• A third‐party SNT cannot hold funds belonging to the

disabled individual himself.

• First‐Party SNT can help set aside some or all of the

money for supplemental needs and still allow the money for supplemental needs and still allow the person to receive public benefits without any period of disqualification.

• First‐Party SNT can still be used as a tool to set aside

some or all of the money for supplemental needs and y pp allow the person to re‐obtain public benefits.

Evan Farr, CELA | Farr Law Firm 14

Third Party Special Needs Trusts

• For Whom?

–Generally, for parents who want to leave assets to a special needs child p –Because the SNT will own the assets, the beneficiary will not become ineligible for beneficiary will not become ineligible for government benefits.

Evan Farr, CELA | Farr Law Firm 15

Third Party SNTs

• Can serve to hold inheritance that may come

f f il b from family member.

• Cannot hold funds belonging to the disabled

individual himself.

• Can be created during the client’s life by using

g y g a revocable or irrevocable living trust, or upon death through a living trust or through a Last g g g Will and Testament.

Evan Farr, CELA | Farr Law Firm 16

Third Party SNTs (Continued)

• Allows the beneficiary to receive vital public

b fi benefits

• Funds can be used for the special needs

beneficiary to improve care and quality of life until his or her own death

• Any assets left in trust can pass to anyone you

name in the trust document.

Evan Farr, CELA | Farr Law Firm 17

Pooled Special Needs Trusts

• created by a nonprofit organization
• may act as the trustee of the pooled SNT, or it

may select the trustee

• individuals have separate accounts in the

pooled SNT p

• all the money is pooled together and invested

by the trustee by the trustee

Evan Farr, CELA | Farr Law Firm 18

Benefits of the Pooled SNT

• Individual beneficiaries get the services of a

f i l d i professional trustee and more investment

• ptions because there is more money overall.
• A third‐party pooled trust provides a way to

benefit from a special needs trust without having to actually create one.

Evan Farr, CELA | Farr Law Firm 19

First Party Pooled Special Needs Trusts vs Third‐Party Pooled Special Needs

• vs. Third‐Party Pooled Special Needs

Trusts

• “First‐Party” pooled SNTs – also called

“(d)(4)(C)” d h “(d)(4)(C)” trusts – used to protect money that belongs to the special needs beneficiary.

• “Third‐Party” pooled SNTs (which you can use

y p ( y to give money during life, or leave money upon death, for a special needs beneficiary) and , p y)

Evan Farr, CELA | Farr Law Firm 20

Unlike the individual payback trust – i e the (d) (4) (A) i.e., the (d) (4) (A) . . .

• Pooled SNTs may be for beneficiaries of any

d b d b h b fi i age and may be created by the beneficiary himself.

Evan Farr, CELA | Farr Law Firm 21

Requirements to Obtain Medicaid and SSI Medicaid and SSI

• Pooled SNTs must be created and managed by a

non‐profit non‐profit.

• At beneficiary's death, Federal law says the state

does not have to be repaid for its Medicaid does not have to be repaid for its Medicaid expenses on her behalf as long as the funds are retained in the trust for the benefit of other disabled beneficiaries.

– Some states require repayment.

h k

• In most states, anyone over age 65 who makes a

transfer to a first‐party SNT will incur a transfer penalty

Evan Farr, CELA | Farr Law Firm 22

penalty.

(d) (4) (A) Trust Guidelines

• Who can Create parent;

– grandparent; – legal guardian, or – the court

• When?

– It must be created while the disabled individual is under age 65

Evan Farr, CELA | Farr Law Firm 23

Required Reimbursement to State

• Must provide that at the beneficiary's death

i i f d ill fi b d any remaining trust funds will first be used to reimburse the state for Medicaid paid on the b fi i ' b h lf beneficiary's behalf.

• Only if funds remain after such reimbursement

may they be passed on to the beneficiary’s family.

Evan Farr, CELA | Farr Law Firm 24

The Memorandum of Intent: an Additional Safeguard an Additional Safeguard

• Intentions and expectations in a document
• Not legally binding
• Not legally binding

Evan Farr, CELA | Farr Law Firm 25

Memorandum of Intent: C t t Contents

• Individuals and organizations that should be contacted upon death or

incapacity;

• Health care and therapeutic needs;
• The parent’s preferences for education, religion, and child‐rearing

practices;

• Contact information for friends, doctors, therapists, social workers, care

managers, teachers, mentors, etc; g , , , ;

• The child's personal history, degree of independence or mobility,

behavioral issues, and need for assistive technologies;

• The child's interests and personality traits;
• The location of medical records and other important documents.

Evan Farr, CELA | Farr Law Firm 26

Planning for Disabled Adult‐Children

• The Concern

child’s best interest once the child reaches age 18 the – child’s best interest once the child reaches age 18 – the age of legal capacity.

• The Big Choice at age 18: POAs or Guardianship?

The Big Choice at age 18: POAs or Guardianship?

– with sufficient capacity, can appoint an agent under a general POA and AMD, instead of petitioning court for i f di d/ appointment of guardian and/or conservator. – however . . . many special needs kids turning 18 have sufficient capacity but lack sufficient maturity. sufficient capacity but lack sufficient maturity.

• Conservatorship can often be avoided if all assets

are in an SNT, depending on who is the trustee.

Evan Farr, CELA | Farr Law Firm 27

Funding the Third Party Special Needs Trust: Basic Considerations Trust: Basic Considerations

• How much to put into a third‐party SNT:

p p y

– how much will a child with special needs require

• ver her life?

– should the same portion of the estate be left to all

• f the children, no matter their need?

– equal is not always “fair”? – how to assure that there’s enough money? g y – better to err on the side of more money rather than less.

Evan Farr, CELA | Farr Law Firm 28

Factors

• Can’t be certain current programs will

i continue.

• Factor in paying for services, such as case

management, that parents provide free‐of‐ charge today.

Evan Farr, CELA | Farr Law Firm 29

One common solution to the issue of fairness to the issue of fairness

• Life insurance

– divide the estate equally among the children, – supplement the amount going to the special needs trust with life insurance. – The younger the client starts the process, the more ff d bl h i ill b affordable the premiums will be. – If married, the premiums can often be lower for a polic that pa s o t onl on the death of the first policy that pays out only on the death of the first parent or only after both parents die.

Evan Farr, CELA | Farr Law Firm 30

Finding the Funds

• Many families find that a second‐to‐die life

i li i h li i i insurance policy is the most realistic option

– premiums are often lower – trust is funded when it is most needed, after both parents have passed away.

• However, a first‐to‐die policy might make more

sense, and also has lower premiums than two separate policies.

Evan Farr, CELA | Farr Law Firm 31

Funding Factors

• Balance among current needs,
• Retirement funding,
• Needs of the other children,

,

• Anticipated needs of the child with special

needs needs.

Evan Farr, CELA | Farr Law Firm 32

Tools for Calculating the “Special Needs Goal” Needs Goal

• MetLife Calculator (located at

h // lif i i / d k/) http://www.metlifeiseasier.com/metdesk/)

– offers a realistic estimate of how much the child ill d i lif i fi i l will need in lifetime financial support. – calculation should be re‐run periodically

Evan Farr, CELA | Farr Law Firm 33

Trustee Selection

• There are a number of possible solutions

available available.

– Professional trustee often the best option, but may not be enough money to make affordable.

• Most professional trustees require minimum $500,000 in

assets, or else the annual fee becomes disproportionately large.

– Many parents would like to have co‐trustees ‐‐ a professional trustee along with a healthy child as a family trustee family trustee.

• Asset minimum still a roadblock, as is having no appropriate

family member to appoint as co‐trustee

Evan Farr, CELA | Farr Law Firm 34

If the Size of the Trust is Insufficient to Justify a Professional Trustee

• Family Member Trustee
• Pooled Trust Option
• Pooled Trust Option

– A third‐party pooled trust can provide a way to benefit from a special needs trust without creating benefit from a special needs trust without creating

• ne yourself

– Available in most if not all states Available in most if not all states – Some are national

Evan Farr, CELA | Farr Law Firm 35

DRAFTING THE SPECIAL NEEDS TRUST

Edward E. Zetlin, Esq. Edward Zetlin Law

703-379-0442 tli l www.zetlinlaw.com

36

Questions to be Answered in Establishing a self-settled trust? Establishing a self settled trust?

• Was the trust established with the assets of an

individual under the age of 65?

• Was the trust established with the assets of an

individual with disabilities? individual with disabilities?

• Is the individual with disabilities the beneficiary
• f the trust?

Did t d t l l di

• Did a parent, grandparent, legal guardian, or

court establish the trust?

• Does the trust provide specific language to

p p g g reimburse the state, upon the individual’s death for medical assistance paid?

37

Irrevocability Irrevocability

• A second important difference is that a first-

A second important difference is that a first- party SNT must always be an irrevocable trust A third- party SNT can be revocable

• trust. A third- party SNT can be revocable.

For example a parent establishing a third- party trust for his or her disabled child may be party trust for his or her disabled child may be more comfortable with a revocable trust. The trust becomes irrevocable upon the death of trust becomes irrevocable upon the death of the parent. But a first- party trust must always be irrevocable be irrevocable.

38

Opening provisions for a First-Party i l d Special Needs Trust

• Declare how the trust came to be

Declare how the trust came to be established whether by court, parent, grandparent or guardian grandparent or guardian.

• Describe the nature of the trust and that it is

established in accordance with state law and established in accordance with state law and 42 U.S.C. § 13969(d)(4)(A).

• Declare that the trust is irrevocable

Declare that the trust is irrevocable

39

Distribution Provisions Distribution Provisions

• The trust should not direct that distributions

The trust should not direct that distributions be made for the support, health, or maintenance of the beneficiary Avoid any maintenance of the beneficiary. Avoid any language that could interpret the trust as a support trust Instead distributions are to be support trust. Instead distributions are to be made for the beneficiary’s special needs.

40

Give examples of special needs: Give examples of special needs:

• Purchase of dental rehabilitative or

Purchase of dental, rehabilitative or educational services.

• Items that will enrich and make the

Items that will enrich and make the beneficiary’s life more enjoyable.

• Recreational opportunities

Recreational opportunities.

• Maintenance of contact with family

members members.

• Advocacy, including personal care

consultant consultant.

41

Termination Provisions Termination Provisions

• Fees and administrative expenses may be paid

Fees and administrative expenses may be paid during the life of the beneficiary as permitted by the trust document.

• Some expenses may be paid at the individual’s

death before reimbursement of medical assistance to the state assistance to the state.

• Payment to residual beneficiaries, debts due

third parties and funeral expenses may not be p p y permitted before reimbursement of the state for medical assistance.

42

Trustee Selection Trustee Selection

• Often family members become trustees but

Often family members become trustees, but consider whether the family member has financial experience and understands public financial experience and understands public

• benefits. Consider having an experienced and

independent professional or corporate independent professional or corporate fiduciary serve as trustee or co-trustee.

43

Prohibition of Contributions After Age 65

• If assets are added to the trust after the

If assets are added to the trust after the beneficiary with disabilities reaches age 65, the amount added will be treated as a the amount added will be treated as a countable resource for SSI and Medicaid. Therefore the trust should be drafted to Therefore, the trust should be drafted to expressly authorize the trustee to refuse to accept additional contributions to the trust accept additional contributions to the trust after the beneficiary attains age 65.

44

Other common provisions Other common provisions

• Spendthrift Provisions

Spendthrift Provisions.

• Qualification & Public Accountings.

G S f h

• Grantor Trust Status. Because of the

compressed tax rates for trusts and the b fi i ’ ll l i l i beneficiary’s normally low marginal income tax rate, consider drafting the trust as an ‘i i ll d f i ’ ‘intentionally defective’ grantor trust.

45

Drafting Third-party Special Needs Trusts

• Attorneys often draft third-party SNTs for

Attorneys often draft third-party SNTs for parents or grandparents who have children with disabilities They want the child to be with disabilities. They want the child to be eligible for needs-based benefits but they want to assure that resources are available to to assure that resources are available to provide and protect the child upon their death. A person may also wish to establish a trust for A person may also wish to establish a trust for a surviving spouse with disabilities who may be receiving needs-based benefits be receiving needs based benefits.

46

In General In General

• The trust should explicitly state that the

The trust should explicitly state that the grantors (parents or grandparents) intend that the trust assets are set aside for the the trust assets are set aside for the beneficiary’s special or supplemental needs. Avoid any language that enables someone to Avoid any language that enables someone to interpret the trust as a support trust or a discretionary trust with a support standard discretionary trust with a support standard.

47

Purposes Clause

• Use it to state that trust assets are set aside for

Use it to state that trust assets are set aside for the beneficiary’s special, supplemental, or emergency needs emergency needs.

• Provide Information about the Beneficiary –

date of birth; specific disability; public benefits date of birth; specific disability; public benefits received. D l h h i f ll di i

• Declare that the trust is fully discretionary.

48

Non-Reduction Clause Non Reduction Clause

• A non-reduction clause states that the trustee

A non-reduction clause states that the trustee should only use trust funds to provide for the beneficiary without reducing or eliminating beneficiary without reducing or eliminating services or financial assistance for basic maintenance support residential medical or maintenance, support, residential, medical or dental care that the beneficiary may receive in his or her own right from any local state or his or her own right from any local, state or federal government agency.

49

Emergency Clause Emergency Clause

• An emergency clause permits the trustee to

An emergency clause permits the trustee to contravene the ‘non-reduction’ principle that trust assets should not be used if they would y cause loss of public benefits. The trustee is given discretion to determine the existence of ‘ ’ hi h l l d fi d ld an ‘emergency’ which loosely defined would arise when available public resources were so inadequate the primary needs of the inadequate the primary needs of the beneficiary could but be met without the intervention of the trustee intervention of the trustee.

50

Day-to-Day Care Day to Day Care

• Specific authority can be given in the trust for

Specific authority can be given in the trust for the Trustee to engage the services of a care manager A care manager is a licensed clinical

• manager. A care manager is a licensed clinical

social worker, geriatric care manger or similar professional who can be hired to prepare a professional who can be hired to prepare a care- plan and monitor the plan throughout the life of the beneficiary life of the beneficiary.

51

Housing Housing

• Authority should specifically be given in the

Authority should specifically be given in the trust to allow the trustee to purchase a residence If the beneficiary resides in the

• residence. If the beneficiary resides in the

home and receives SSI he or she may face a 1/3 reduction in SSI benefits based on receipt 1/3 reduction in SSI benefits based on receipt

• f in-kind support and maintenance. If the

beneficiary receives SSDI the 1/3 reduction beneficiary receives SSDI the 1/3 reduction does not apply.

52

Trustee compensation and d i i i f administrative fees

• The trust should authorize the trustee to pay

The trust should authorize the trustee to pay himself or herself reasonable compensation in accordance with express provisions in the accordance with express provisions in the trust or an applicable statute. The trust should contain express authority for the trustee to pay contain express authority for the trustee to pay reasonable legal fees, care management fees, taxes and administrative expenses form the taxes and administrative expenses form the trust.

53

Retirement Plan Distributions Retirement Plan Distributions

• Because retirement plan accounts are

Because retirement plan accounts are frequently a significant portion of the savings

• f parents with children having special needs
• f parents with children having special needs,

the parents will frequently designate the third- party SNT as the beneficiary of these accounts party SNT as the beneficiary of these accounts after both parents are ceased. The drafting attorney must take caution when dealing with attorney must take caution when dealing with this issue.

54

Conduit versus Accumulation Trusts Conduit versus Accumulation Trusts

• A conduit trust, which simply passes the minimum

p y p distribution from the trust to the beneficiary, is not suitable if the beneficiary is on SSI or Medicaid because distribution from the trust will be income for eligibility determination.

• If the third-party SNT is the beneficiary of the

retirement plan benefits, it should be drafted as an p , ‘accumulation trust’. An accumulation trust permits the trustee to accumulate minimum required distribution in the trust principal and make q p p distribution for the benefit of the disabled beneficiary in the trustee’s discretion.

55

Planning to Obtain an Annual l i f ib i h Exclusion for Contributions to the SNT

• Unlike conventional Crummey Power

Unlike conventional Crummey Power planning, the SNT beneficiary cannot be a recipient of the Crummey Power The recipient of the Crummey Power. The drafting attorney should instead name a person other than the SNT beneficiary such as person other than the SNT beneficiary such as a remainder beneficiary of the trust in order to qualify for the gift tax exclusion qualify for the gift tax exclusion.

56

Remainder Beneficiaries Remainder Beneficiaries

• Because there is no pay‐back requirement

Because there is no pay back requirement include remainder provisions if trust assets remain after the death of the primary remain after the death of the primary

• beneficiary. Even in the first‐party trust

remainder beneficiaries should be included remainder beneficiaries should be included.

57

Termination Clause Termination Clause

• If the law changes that would make SNT

If the law changes that would make SNT assets available resources, the trustee has the power to end the trust and distribute to the power to end the trust and distribute to the remainder beneficiaries. This power should be only in the trustee The disabled be only in the trustee. The disabled beneficiary should not have the power.

58

Bibliography

• Hook, Andrew H.& Smith, Sandra L., Special Needs Trusts,

Ch 6 Eld L I Vi i i A H db k f L

• Chap. 6, Elder Law In Virginia, A Handbook for Lawyers

(Virginia CLE Publications, 2011).

• Zimring, Stuart D., Morgan, Rebecca C., Frigon, Bradley J.,

g, , g , , g , y , Fundamentals of Special Needs Trusts (LexisNexis, 2011).

• Frolik, Lawrence A. & Brown, Melissa C., Advising the

Elderly or Disabled Client (RIA 2d ed 2006 & Supps ) Elderly or Disabled Client (RIA, 2d ed. 2006 & Supps.).

• Kruse, Clifton B. Jr., Third-Party and Self-Created Trusts,

Planning for the Elderly or Disabled Client (ABA 3d ed. 2002).

59

Contact Information Contact Information

• Edward Zetlin Law

Edward Zetlin Law Edward Zetlin 2921 A S Woodstock Street 2921 A S. Woodstock Street Arlington, Virginia 22206 Tel 703‐379‐0442/Fax 703‐379‐7864 Tel 703 379 0442/Fax 703 379 7864 www.zetlinlaw.com

60

Martha C. Brown & Associates, LLC 220 W. Lockwood, Ste. 203

• St. Louis, MO 63119

314‐962‐0186 www.elderlawstlouis.com

61

SPECIAL DUTIES OF A TRUSTEE OF A SPECIAL NEEDS TRUST

• In addition to Traditional Trustee Duties,

In addition to Traditional Trustee Duties, Trustee of Special Needs Trust have additional duties

• Evaluation of Beneficiary
• Duration of Trust
• Personal Supervisor
• Professionals

62

ACCOUNTS ACCOUNTS

• To Whom to Account

–Courts –Trust Beneficiaries

63

ACCOUNTS – Cont’d ACCOUNTS Cont d

• Social Security Administration
• Social Security Administration
• State Medicaid Agency
• Other Governmental Agencies that
• Other Governmental Agencies that

provide benefits

64

UNIFORM PRUDENT INVESTOR ACT UNIFORM PRUDENT INVESTOR ACT

• Prudent Investor Rule must be
• Prudent Investor Rule must be

followed unless document says

• therwise

65

DISTRIBUTIONS DISTRIBUTIONS

• Distributions from Self Settled
• Distributions from Self‐Settled

Special Needs Trusts

66

PERMISSIBLE TRUST DISTRIBUTION/SSI RECIPIENTS

• ISM – In Kind Maintenance and Support
• Examples of ISM
• General Rules

67

DISTRIBUTIONS RELATED TO HOUSING COSTS

• Household Goods and Personal Effects
• Services
• Living Arrangement

68

DISTRIBUTIONS RELATED TO ’d HOUSING COSTS – Cont’d

• Business Arrangement
• Household of Another
• Own Household
• Housing Subsidies

69

DISTRIBUTIONS RELATED TO ’d HOUSING COSTS – Cont’d

• Special Needs Trust as Section 8

Landlord Landlord

• Home Improvements

p

• Inability of Family to Pay It’s Share
• Third Party Trusts and Distributions

for Housing

70

DISTRIBUTIONS RELATED TO DISTRIBUTIONS RELATED TO ENTERTAINMENT

• Use of cash
• Vacations
• Vacations

–POMS Considerations

71

DISTRIBUTIONS RELATED TO ’d VACATIONS – Cont’d

• Payment of Travel Costs

Oth F il M b

• Other Family Members
• Appropriate vacation
• Appropriate vacation
• Expense of vacation
• Expense of vacation
• Spending Money

Spending Money

72

DISTRIBUTIONS RELATED TO MEDICAL EXPENSES

• Medical Insurance
• Non‐Covered Medical Expenses
• Provider Non‐Acceptance
• Out‐of‐Pocket expenses, i.e. co‐pays

73

DISTRIBUTIONS FOR CAREGIVERS DISTRIBUTIONS FOR CAREGIVERS

• Insurance Considerations
• Insurance Considerations

–Worker’s compensation insurance –Casualty insurance Wage and hour legislation –Wage and hour legislation –FICA and FUTA –Employer Withholding

74

DISTRIBUTIONS TO PARENT AS CAREGIVER DISTRIBUTIONS TO PARENT AS CAREGIVER

Q lifi i

• Qualification
• Compensation

L l Obli i f S

• Legal Obligation of Support

75

DISTRIBUTIONS TO PARENT AS ’d CAREGIVER ‐ Cont’d

• Deeming/Income Issues
• Deeming/Income Issues

–Medicaid –Supplemental Security Income (SSI) Income –Income –Income not coounted –Earned income

76

DISTRIBUTIONS TO PARENT AS ’d CAREGIVER – Cont’d –Unearned income –Deeming Deeming –Payment to parent‐earned or unearned income? Care agreement –Care agreement

• Distributions of Cash

77

OTHER DISTRIBUTIONS

R i b t f E t Thi d P ti

OTHER DISTRIBUTIONS

• Reimbursement of Expenses to Third Parties
• Alimony/Court‐Ordered Child Support
• Payment to Creditors

78

CREDIT CARDS CREDIT CARDS

• Income

S l B fi f B fi i f T

• Sole Benefit of Beneficiary of Trust
• Improper Use of Credit Cards
• Payment of Credit Card Bills

Payment of Credit Card Bills

79

THE HOME

• Purchasing the Home

–Special Needs Trust Purchases Home –Tenancy in Common –Beneficiary Owns Home –Trust Pays for Life Estate in Home with y Remainder to Parents –Third‐Party Special Needs Trust –Parents Purchase Home –Revocable Living Trust Purchase Home Revocable Living Trust Purchase Home

• The Home and the POMS

80

THE VEHICLE THE VEHICLE

• Trust Purchases Vehicle in Name of
• Trust Purchases Vehicle in Name of

Trust

• Trust Purchases Vehicle in Name of

Parent P t/S /B fi i

• Parent/Spouse/Beneficiary

Purchases the Vehicle

81

THE VEHICLE – Cont’d THE VEHICLE Cont d

• Selection of Vehicle
• Selection of Vehicle

–Safety Safety –Funding –Replacement Schedule –Resource –Resource

• Pro Rata Share
• Driving Record

82

TERMINATION OF TRUST TERMINATION OF TRUST

• EVENTS TRIGGERING TERMINATION
• EVENTS TRIGGERING TERMINATION
• PAYMENT FOR FUNERAL AND DEBTS

PAYMENT FOR FUNERAL AND DEBTS

• Administrative Expenses

Administrative Expenses

• Debts of the Beneficiary
• Medical Payback

83

TERMINATION OF TRUST – Cont’d TERMINATION OF TRUST Cont d –Determining the Amount of Payoff –Release D d ti f P b k

• Deductions from Payback
• Extent of Payback

84

TERMINATION OF TRUST – Cont’d TERMINATION OF TRUST Cont d

• Partial Distributions
• Partial Distributions
• Distribution upon Termination
• Accounting
• Accounting

85

REPORTING REQUIREMENTS REPORTING REQUIREMENTS Wh M R

• Who Must Report
• What to Report

86

REPORTING REQUIREMENTS – Cont’d REPORTING REQUIREMENTS Cont d

• When to Report

When to Report

• How to Report
• Content of Report
• Untimely Reporting
• Untimely Reporting

87

TAX ISSUES TAX ISSUES

• Employer Identification Number
• Employer Identification Number
• Taxable Income
• Taxable Income
• Tax Rates
• Tax Rates
• Tax/Public Benefits Income
• Tax/Public Benefits Income
• Income Tax Reduction Strategies
• Income Tax Reduction Strategies

88