New Jersey SNT Estate Planning Attorney.
Call our office today. Ask for Mr. Niemann to personally discuss your New Jersey Special Needs Trust.
Call him toll-free at (855) 376-5291
or e-mail him at fniemann@hnlawfirm.com.
He looks forward to meeting with you.
1. Estate Planning for a Child and
Adult With Special Needs
and
Important Estate Planning
Considerations for Parents of Children
with Developmental and Chronic
Disabilities
2. Presented by
Fredrick P. Niemann, Esq.
Elder Law, Asset & Estate Protection
Planning, Medicare, Medicaid and
Veteran’s Benefit Assistance Lawyers
www.specialneedstrustnewjersey.com
www. njelderlawcenter.com
www.njmedicaidlawattorney.com
Visit me at
Hanlon Niemann, PC
3499 Route 9 North, Suite 1F
Freehold, NJ 07728
Phone: (888) 800-7442
fniemann@hnlawfirm.com
3. Fredrick P. Niemann, Esq.
Fredrick P. Niemann offers his clients over 30
years of accomplished practice in the law. He is a
member of the National Academy of Elder Law
Attorneys, the Guardianship and Conservatorship
Committee of NAELA, Monmouth County
Probate and Estate Committee and the Monmouth
County Chancery Practice Committee. Mr.
Niemann is one of the few attorneys in New Jersey,
accredited by the Veteran’s Administration, to
apply for Aid and Attendance benefits for Veterans
and/or their spouses.
4. Legal Wit
What’s wrong with lawyer jokes? Lawyers don’t
think they’re funny, and nobody else thinks
they’re jokes.
How can you tell when a lawyer is lying? His lips
are moving.
5. Cont.
What’s the difference between a good lawyer and
a great lawyer? A good lawyer knows the law. A
great lawyer knows the judge.
The first thing we do, let’s kill all the lawyers.
Shakespeare
6. Facts of Life
1. Persons with disabilities are living longer and public
benefits are often necessary.
2. There is no guarantee that public benefits will provide
adequate resources over the disabled person’s lifetime.
3. There is no guarantee that public agencies will provide
services and advocacy over the disabled person’s
lifetime.
7. What Does Planning Involve?
Preserving your loved one’s financial
security and quality of life
Addressing key issues: Those key issues are:
Understanding the role of public benefits today
Making assumptions about public benefits in the
future
Using estate planning/trusts to protect your assets for
the financial security of your loved one’s future
9. Public Benefits at a Glance
Financial Benefits
Supplemental Security Income (SSI)
Means tested: Income and asset limitations for eligibility
Social Security (SS)
&
Social Security Disability Insurance
(SSDI)
Not means tested but subject to work credits
or parents’ eligibility
10. Public Benefits at a Glance
Medical Benefits
Medicaid
Automatic with SSI
Must apply for SS/SSDI for first 2 yrs
Medicare
After two years of SSDI
11. Supplemental Security Income (SSI)
Must meet SSA’s definition of “disability” and
have limited assets/income
Provides monthly income for food/shelter
Gateway to Medicaid / in-home support
services
12. Social Security (SS) / Social Security
Disability Insurance (SSDI)
Social Security for individuals:
Disabled before age 22 and
With parents eligible based on their work record if retired,
disabled or deceased
SSDI for individuals with work record
Social Security benefits may reduce or eliminate
SSI benefits if greater than monthly SSI benefit
13. Medical Assistance & Support
Medicaid:
SSI recipients automatically receive Medicaid
Covers “medically necessary” services, equipment,
hospitalization
In-home services needed to live at home: personal care,
housekeeping, cooking, transportation to doctors
SS & SSDI individuals must apply for Medicaid
Medicare:
Medical coverage, including doctors, hospital, skilled care
Individuals with SS or SSDI eligible for Medicare after 2 years
of eligibility
16. Typical Timeline for a Child
With a Disability
Upon Attaining Age 18
Deeming of parents’ income and resources to
the disabled child ends.
Child becomes eligible for public benefits based
upon evidence of disability and the child’s low
income and resources – parents’ resources not
considered in determining child’s eligibility.
Parental decision-making authority ends Guardianship may be necessary.
17. Providing for Persons
with Disabilities
Pitfalls to commonly used eligibility
strategies:
¦ Uniform Gift to Minors Act Accounts (UGMA
or POD Accounts)
¦ Unstructured Beneficiary Designations
¦ No planning at all
18. Uniform Gifts to Minors Act
(UGMA) Accounts
¦Once the child takes control of the account ( age
18 or 21), the child may then use the money for
purposes other than education -- regardless of the
custodian’s wishes.
¦
UGMA accounts are considered available
resources for purpose of SSI eligibility.
19. Unstructured Beneficiary Designations
Naming an SSI, beneficiary Medicaid recipient or
minor child as the beneficiary of a retirement plan
(401k,IRA, etc.), life insurance policy annuity or
any other resource, investment, asset (ie.
brokerage account, CD’s, money market, etc.) will
cause a reduction or elimination of public benefits.
20. No Planning at All
Dying intestate (without a will or trust) will usually leave
all or a portion of the estate of a single parent, person to
the decedent’s children.
¦
Any child receiving SSI or Medicaid will lose
eligibility until the inheritance is either spent down,
converted to a exempt resource, or placed in a Special
Needs Trust.
21. Providing for Persons
with Disabilities:
Special Needs Trust Basics
Purpose - To preserve the disabled person’s
eligibility for needs-based governmental
benefits while providing assets which may be
used to supplement public benefits in order to
improve the disabled person’s quality of life.
22. Third Party SNT
1. Established with assets owned by a third party
(ie: parents, grandparents, aunts, uncles) for
the benefit of the disabled person.
2. Usually established and funded by the parents,
relatives or friends of the disabled adult child
as part of an estate or gifting plan.
3. Other children can be named as remainder
beneficiaries after death of disabled person.
23. Third Party SNT (cont’d)
4. Third Party SNT may be revocable and inter vivos,
or irrevocable and testamentary.
5. No need to pay Medicare or Medicaid liens before
funding.
6. No age limit for disabled beneficiary.
7. “Pay-back” to the State of NJ, Medicaid and
Medicare provision not required (doesn’t matter if
beneficiary is an adult or minor)
24. The Golden Rule
The golden rule in SNT planning - the trustee
should make payments on behalf of the beneficiary
directly to third party vendors for equipment or
services which are not food or shelter. For
example, distributions directly to a retailer for a
radio or television, to an airline for a plane ticket,
or to a companion/aide for services rendered are
not income to the beneficiary.
25. Objectives Should be Expressed in The
SNT and Memorandum of Intent
The trust should set out broad instructions
that are not likely to change.
Example - “I wish that my child live as
independently as possible in the least restrictive
environment”.
26. Objectives Should be Expressed in the
SNT and Memorandum of Intent
The memorandum of intent should reflect
more timely and detailed instructions.
Example - “I have inspected the Monmouth County
Independent Living Center and, in the event of my
incapacity or death, I believe that this facility meets
my son David’s needs. Please make sure that David
is monitored regularly by the care manager, especially
regarding his medication because he is prone to
frequent side effects”.
27. Follow-Up Steps:
(1) Select Resources
Select a combination of resources that will
guarantee adequate funds for the disabled child’s
lifetime, such as insurance, savings, investments,
family assistance, etc., and change the ownership
of each asset to the trustee of the SNT.
28. Follow-Up Steps:
(2) Remove Child as Beneficiary
Remove the disabled child as the beneficiary from all of
the parents’, and others relatives’, financial programs, i.e.,
employer sponsored retirement plans, IRAs, KEOGHSs,
life insurance policies, joint accounts of all types,
brokerage and financial.
A. This is 1 of the 10 Commandments for asset
protection planning.
29. Follow-Up Steps:
(3) Meet With Caregivers
Hold a meeting with all interested parties, i.e., the
Guardian, all Trustees and Successor Trustees and
all siblings, to review the estate planning
documents, discuss plan and management of trust
assets.
30. Case Study: Nathan
Current situation:
18-year-old with autism
Lives with mom
Income from work programs, SSI, Social
Security (from dad who is deceased)
Limited personal assets (clothing, tv)
Qualifies for Medicaid
31. Case Study: Nathan
Future situation:
Who will make health care decisions?
Who will make financial decisions?
Where will he live?
How will his medical expenses be paid?
32. What Plan Could
Nathan’s Mom Make?
Possible Options:
Make no decisions/plans
Leave money to Nathan
Disinherit Nathan
Leave money to a future caregiver
Establish third-party SNT for Nathan
Establish first-party SNT for Nathan
33. Example: Distributions from a
Supplemental Needs Trust Directly
to an SSI Beneficiary
Jill is the trustee of a special needs trust established by her
deceased mother, Paula, for the benefit of Paula’s disabled
daughter and Jill’s sister, Anne. Anne’s living expenses,
including rent, food, transportation and clothing, total
approximately $2,000 per month. Jill sends Anne a check
on the first of every month for $2,000 so Anne can pay her
expenses. Since Anne is receiving cash income in excess
of her monthly SSI benefits, she loses her SSI. Since
Anne received Medicaid based on her SSI payment, she
also loses Medicaid.
34. Example: Distributions from a
Supplemental Needs Ttrust to Third Party
Vendors for Food or Shelter
Jill is the trustee of a testamentary supplemental needs
trust established by Joan under her last will and
testament for her adult disabled daughter, Pamela.
Pamela receives SSI, Medicaid, food stamps and
services from DDD. Pamela lives in an apartment. Jill
signed the lease as trustee of the SNT and pays all rent
directly to the landlord. The rental payments will
result in a reduction, but not the elimination, of
Pamela’s SSI benefits.
35. Example: Distributions from a SNT to
Third Party Vendors for Items Which are
Not Food or Shelter
Jill, a disabled adult, receives SSI. Joan is the trustee
of a special needs trust established by Jill’s parents
for her benefit. Jill likes to read the National Review
not the (New York Times.) Joan arranges with the
local newspaper distributor to deliver the National
Review not the (New York Times) to Jill on a daily
basis, including Sundays, and pays the bill directly to
the newspaper distributor. This is not considered
income, and will not affect Jill’s SSI benefits.
36. Follow-Up Steps:
(4) New Wills for Parents
Prepare Last Will and Testaments for parents
excluding the child from receiving any portion of
the parents’ estate outright and free of trust which
may cause the disabled child to lose government
benefits.
Create a Discretionary Supplemental Needs
Trust to protect future quality of life for the child.
37. Periodic Update and Review
The Estate Plan should be periodically reviewed to:
• Ensure all assets either are owned by the SNT, or
SNT is named as the beneficiary of the assets.
A. The importance of beneficiary designations
• To update trustees and persons representatives and
power of attorney
• Changes in the beneficiary’s condition or eligibility
for benefits.
• Changes in your economic situation.
39. What Steps Should You Take Today?
Step 1: Envision Your Child’s Future
Planning ahead makes a difference:
Where and with whom will your child live?
What type/level of care will be required?
Will a guardian/conservator be necessary?
Who else will be involved?
What kind of lifestyle is desired?
What unforeseen challenges could arise?
40. What Steps Should You Take Today?
Step 2: Create a Memorandum of Intent
Lays out goals/expectations:
Details preferences, needs, wishes, both medical and personal
Lists key people in child’s life
Helps guide:
Family members
Trustees
Caregivers
Others
41. What Steps Should You Take Today?
Step 3: Estimate Income & Expenses
Monthly income:
SSI, SSDI, Social Security, earned/unearned income
Monthly living expenses:
Housing, food, transportation, medical, recreation, etc.
Consider how any shortfall will be met
Income - Expenses = Shortfall
42. What Steps Should You Take Today?
Step 4: Utilize a Third-Party SNT
Provides supplemental funds for living expenses
not covered by other income sources
May be established by parents:
Through will
Through living trust
“Living” SNT lets others contribute
Trustee has discretion over distributions
43. The SNT Trustee Responsibilities
What are the trustee’s responsibilities?
Invests/manages assets
Distributes funds
Keeps books
Files tax returns
Hires advocates and care managers, etc., as needed
44. Selecting an SNT Trustee
Who should be the trustee?
Parent with professional co-trustee
Corporate or other professional trustee
Successor trustee
45. What Parents Should Do
Create Memorandum of Intent
Calculate future financial need
Establish SNT through will or living trust
Fund SNT with life insurance
Name SNT as beneficiary of accounts, plans,
etc.
Reduce taxable estate
46. What Your Child Should Do
Sign Advance Directives, if legal capacity
Have a legal guardian appointed:
When child without mental capacity becomes an adult and
parents want to maintain legal responsibility
Court appoints legal guardian
47. What If Your Child Has Assets?
Establish a First-Party SNT:
Provides funds for living expenses not covered
by other income sources
Maintains eligibility for public benefits
Must be established by parent, grandparent, legal
guardian or the court
State must be reimbursed from the trust for all
Medicaid expenses
48. Get Started Today
Understand your child’s eligibility for public
benefits.
Make plans for the future to maximize public and
private resources for your child’s benefit.
Make the SNT a key part of your estate plan.
Contact a special needs attorney for the assistance you need.
Fredrick P. Niemann, Esq.
NJ Elder Law and NJ Special Needs Trust Attorney
Hanlon Niemann, PC
3499 Route 9 North, Suite 1F
Freehold, NJ 07728
Phone: (888) 800-7442
fniemann@hnlawfirm.com
www.specialneedstrustnewjersey.com
www.njelderlawcenter.com
To qualify for SSI, an individual must meet the Social Security Administration’s definition of “disabled” and have limited assets and income. SSI can be impacted as follows:
It is reduced, dollar for dollar, if the individual has more than $____ in unearned monthly income, such as gifts, interest or rent.
It is reduced by one dollar for every two dollars earned if the individual has earned income (wages) above $_____ a month.
It is reduced by one third if the individual receives in-kind support and maintenance (i.e., food and shelter).
For eligible individuals, SSI pays up to $___ a month for food and shelter.
A growing number of parents over age 65 are caring for adult children with special needs. As parents retire, become disabled or die, their children become eligible to receive their Social Security benefits as follows:
If a parent who is eligible for Social Security is retired or disabled, the child receives an amount equal to ½ of the parent’s benefit.
If a parent who was eligible for Social Security dies, the child receives an amount equal to ¾ of what the parent was receiving or would have received at retirement.
If a child is receiving SSI, it can be reduced, dollar for dollar, by Social Security. A large Social Security benefit can even disqualify the child for SSI, triggering the loss of Medicaid. The child then must reapply for Medicaid separately.
A special needs attorney can help you plan ahead for this type of situation.
Government decides amount of in-home support offered to Medicaid recipients.
In-home support can include paramedical services.
[Note to speaker: replace “autism” with relevant condition based on audience.]
Once families understand the role of public benefits, they can make decisions about their children’s future. Planning ahead is critical to preserving a child’s quality of life. Let’s consider Nathan….
While Nathan’s mom is alive and able-bodied, Nathan will continue to live at home and mom will make his medical and financial decisions. Nathan receives Social Security because his dad was eligible for benefits before he died. Nathan’s mom is not currently eligible for Social Security.
What will happen to Nathan?
After Nathan’s mom dies, his SSI will increase but his resources will not be sufficient to preserve his quality of life.
Nathan will need someone to make his medical and financial decisions. He also will need a place to live if he is unable to stay in the family home. And he will need a way to pay for medical expenses.
What plan of action could Nathan’s mom make to protect him after her death?
No plans: If Nathan inherits assets under mom’s will, he will be disqualified from SSI and be forced to live on the inheritance and income from Social Security and work programs. When the inheritance is gone, Nathan will qualify for SSI again but have no supplemental income to preserve quality of life.
Disinherited: If mom leaves all assets to Nathan’s sister with the understanding that she will care for Nathan, he will remain eligible for SSI but could become destitute if the sister cannot or will not comply with the mom’s request.
Non-SNT Trust: If Nathan’s mom creates a trust that is not an SNT, income and principal will be counted as his assets and he will lose SSI.
Third-Party SNT: If Nathan’s mom establishes a third-party SNT, Nathan will keep SSI and benefit from supplemental funds, which the trustee will distribute. The trust can be structured to help ensure the involvement of people important to Nathan. [optional:] The trust also may require and provide money for periodic monitoring of Nathan’s caregivers. At Nathan’s death, there will be no “payback” to Medicaid.
First-Party SNT: If Nathan has his own assets, his mom can establish a first-party SNT. This works in the same way as the third-party SNT except that, at Nathan’s death, any funds remaining in the trust are subject to a Medicaid payback.
As we’ve seen from Nathan’s situation, planning can make the difference between just getting by and enjoying a higher quality of life.
The first step is considering how you – and your child – envision the future.
[Additional point]
What unforeseen challenges could arise, such as medical complications?
The next step is writing it all down.
The Memorandum of Intent should include ample information to help anyone involved in your child’s future care understand the child’s unique personality, strengths, challenges, needs, etc. It also should provide details about all aspects of the child’s lifestyle, including medical and rehabilitation needs, recreational activities, educational expectations and work goals. For example, under “Residential Directions,” the document may state that the child will one day own a home or that a live-in caregiver will be given rent-free accommodations in the home.
The Memorandum of Intent is not a legally binding document. But, because it can contain information not appropriate for SNT documentation, it can enhance the trustee’s understanding of the child’s situation and needs.
Once you’ve described your child’s desired lifestyle, you’ll need to determine what it will cost and whether he or she will have adequate resources.
When estimating your child’s future income, consider whether you will be receiving Social Security benefits and/or whether your child will qualify for SSI, have earned income from employment, or have unearned income, such as from investment returns.
When considering monthly expenses, list costs for items under such categories as:
Housing
Care assistance
Personal needs
Education
Transportation
Medical/dental
Food
Social/recreational
Your child’s expenses may exceed his or her income. If so, the shortfall represents the minimum amount that should be set aside in an SNT.
An SNT offers a good way to preserve public benefits while providing the supplemental funds needed for a higher quality of life. Assets in the SNT do not disqualify the beneficiary from public benefits because they are owned by the trust. The trustee distributes assets for the benefit of the beneficiary according to strict guidelines.
In Nathan’s case, the parents might have funded the SNT with life insurance and left the assets accumulated over their lifetime to their daughter. This would have allowed them to preserve Nathan’s quality of life by maximizing public and private resources, while still meeting other important estate planning goals and preserving harmony between brother and sister.
An SNT also can be tailored to meet individual situations, such as the need for an advocate, care manager or conservator.
Once parents decide to establish an SNT, they should carefully consider who will assume the role of trustee. The trustee’s responsibilities are complex and errors can result in the child losing public benefits.
Whether the trustee is a family member, attorney or corporation, it is important to name a successor trustee. Some families also set up a Trust Advisory Panel, which allows members (parents and siblings, advocates. others) to weigh in on important decisions regarding the trust.
Additionally, the trustee may be directed to or choose to involve others in the execution of duties. For example, the trustee may hire an investment manager or be directed by the trust to retain an advocate or care manager who will oversee the personal needs of the beneficiary.
If there is an SNT in place, anyone wishing to bequest assets from a retirement plan, insurance policy, etc. should be told to name the SNT, rather than the child, as beneficiary.
Parents with more than one child who wish to pass assets equitably can provide for the child with special needs by funding the SNT with life insurance.
Funding an irrevocable SNT removes the transferred assets from the parent’s taxable estate.
If the individual with special needs is competent, at legal age, he or she should put in place critical estate-planning documents, including a will, advance directive and medical power of attorney.
If the individual is not competent, a parent or other individual can be named as guardian or, in extreme cases, conservator of both the individual and the estate.
Parents must be named as guardians to continue making legal decisions for a child who has attained legal age.
The role of guardian or conservator can be challenging when an individual is developmentally disabled and/or mentally ill.
Pooled trusts, established by disability organizations, provide an alternative for families with limited assets.