Special Needs Trusts continue to be Vital for People with Disabilities

The term “special needs trust” is used to refer to a trust that’s for benefit of a person with disabilities who depends on means-tested public benefits that have income limits or resource/asset limits. Sometimes these are “first party trusts” — created by the disabled person (over age 18) or his parent, grandparent, or guardian with court permission, or by a court, and funded with assets owned by the disabled person. Other times they are “third party trusts” — created by somebody (such as a parent or grandparent) for benefit of a disabled family member, and funded with the parent or grandparent’s assets. Still other times, these Trusts are written into a Last Will and Testament, so that the share being left to the disabled person will be protected within the “special needs trust.”  Now more than ever, families and individuals should review their estate plans to see if trusts are needed.

When an estate inheritance passes to a person who depends on means-tested benefits like SSI or Medicaid/.MLTSS, the individual might lose their benefits after receiving the inheritance because they will have excess resources. This creates a particularly risky situation for a person who receives Supports services through the NJ Division of Developmental Disabilities, because DDD benefits depend upon the person meeting those means-tested criteria. It can also be risky for an individual who receives skilled nursing benefits through the Medicaid/MLTSS program. There are remedies available, such as filing a court petition, but time and benefits can be lost while the remedies are being pursued. And now in this time of court closings due to COVID-19, everything is more difficult to pursue in court. Supreme Court release 3-27-2020

A special needs trust can be written in your Will and can be named as the beneficiary of your tax-deferred account (IRA, 401K, etc.) or your life insurance. The trust can be designated to receive the share of your probate assets that would otherwise go directly to the person with disabilities (causing the problems described above). Careful planning can prevent a crisis. If one of the potential heirs of your estate or your Will is disabled, you may want to review your plans to see if a special needs trust  would be protective for your heir.

Call us for advice about estate planning with special needs trusts …  732-382-6070

LifeTown: a special downtown for individuals with special needs

An innovative community service for people with special needs was recently opened in Essex County called “LifeTown: The Jerry Gottesman Center” in Livingston. It’s like a mini-mall filled with shops such as a pet store, a book store, a bank, a movie theater and a food market, as well as  recreational venues including  a music studio, basketball court and more. Evidently it’s 53,000 square feet and is staffed by both professionals and volunteers through the Friendship Circle of New Jersey. Some of the businesses are independent businesses with their own employees. Friendship Circle participants have the opportunity to learn job skills as well as skills with handling money and shopping. There will be social activities, work activities and recreational activities, all designed for skill-building, socialization. One of the goals of the mission of Friendship Circle and LifeTown is “to fully integrate people with special needs into the community and society at large ” and to “simulate life in a safe and accessible environment.”

For information about participation in Friendship Circle, click here

Life care planning for family members with special needs requires forward-thinking, innovative strategies, Call us for help with your estate planning needs … 732-382-6070

Great Reasons to Update your Will Once in a While

The years really fly by. I can’t tell you how many times some one has come in to meet with me who signed a Will 25 years before and never updated it. When major changes occur in your life, it’s important to see your lawyer for a “check up” to make sure that your old Plan is still a good Plan for you. Here are samples of situations I have encountered, which required an updated Last Will and Testament and updated beneficiary designations on assets such as life insurance or tax-deferred accounts:

  1. Grandchild has severe disabilities, will be unable to support himself, and depends on programs that require Medicaid eligibility. An outright inheritance could be disastrous.
  2. Child has acquired substantial debt or is in the midst of a divorce.
  3. Beneficiary turns out to be a major spendthrift  and should have somebody controlling and managing his inheritance.
  4. You no longer have a relationship with the people you listed as your Executors.
  5. Your designated Executor or Trustee has passed away.
  6. You want to guarantee that certain charitable bequests will be made.
  7. You want to leave money to your grandchildren as “something special,” even though the rest of your estate will go to your children (their parents).
  8. You have a Will from the 1990’s that left the “credit shelter amount” locked up in a trust for your surviving spouse to minimize estate tax in the estate of the 2nd spouse to die, yet now, there is no NJ estate tax and no federal estate tax for almost everyone
  9. You left a beneficiary’s share in a Trust under your Will, but now she is older and fully capable of managing her own assets.
  10. Your spouse is going into a nursing home and you want to limit the amount s/he inherits if you pass away first.
  11. You got married, gave birth or adopted a child, or you want to leave some assets to your step-children.

Whatever has changed, family estate planning should be an ongoing process throughout your life, starting at age 18 and moving on from there.

Call us to set up a plan that works for you …… 732-382-6070

 

Trustee of Special Needs Trust must be cautious in making reimbursements

A person who is receiving Supplemental Security Income (SSI) from the Social Security Administration must report changes in his income or resources (assets) to SSI, because this can affect his eligibility or the amount of benefits. If countable resources exceed $2,000 on the first of a month, eligibility can be lost. If the issue is detected after the fact, there can be a resulting overpayment than can take months to straighten out. If assets are placed into, or are being held in, a Trust, there might be an impact on eligibility depending on the terms of the Trust, how those assets are distributed by the Trustee, and how much control the SSI recipient has (if any) over the assets in the trust.

A Trust established with assets of the SSI recipient or applicant might be excluded from the $2,000 resource limit if it meets the many requirements  for a Special Needs Trust. Particular problems come up when somebody has been spending money on the beneficiary and needs to be reimbursed by the Trustee. The payments out of the Trust to that third party may be viewed by the Agency as improper disbursements that violate this “sole benefit” requirement if the trustee can’t produce satisfactory proof to justify the reimbursement. If the payments are made out of a first party trust, the entire corpus (principal; value) of the Trust may be treated as an available resource because the payments to the third party are “not for sole benefit” of the Trust beneficiary. If cash is just transferred out of the Trust to the third party’s account to use for the beneficiary, this can create problems as well.  The standards are explained by the Social Security Administration in this section 01120.201.2.b of of the procedure manual called the “POMS,”  where it says, ” …do not consider a trust that provides for the trust corpus or income to be paid to or for a beneficiary other than the SSI applicant/recipient to be established for the sole benefit of the individual.” The POMS continues:

. ” Exceptions to the sole benefit rule for third party payments

“Consider the following disbursements or distributions to be for the sole benefit of the trust beneficiary:

  • Payments to a third party that result in the receipt of goods or services by the trust beneficiary;
  • Payment of third party travel expenses which are necessary in order for the trust beneficiary to obtain medical treatment; and
  • Payment of third party travel expenses to visit a trust beneficiary who resides in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement. The travel must be for the purpose of ensuring the safety and/or medical well-being of the individual.”

These are limited exceptions. If the Trustee is issuing payments to individuals under the guise that it is a reimbursement for expenditures that aren’t within these narrow categories, there will be a presumption that the trust is giving out money to third parties unless the Trustee can prove otherwise. The Trustee of any Trust for benefit of a person on SSI needs to assume that s/he will have to provide accountings and receipts in exquisite detail for scrutiny by the Social Security Administration. Great care should be exercised once a trustee takes on this major responsibility.

For advice on establishing and administering Special Needs Trusts, call ….. 732-382-6070