Special Needs CEU Presentation


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Special Needs CEU Presentation
Call our office today. Ask for Mr. Niemann to personally discuss your New Jersey Special Needs Trust.
Toll-free at (855) 376-5291
or e-mail at fniemann@hnlawfirm.com.

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  • {"49":"The next step is writing it all down. \nThe 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. \nThe 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.\n","55":"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.\nIf 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.\nParents must be named as guardians to continue making legal decisions for a child who has attained legal age.\nThe role of guardian or conservator can be challenging when an individual is developmentally disabled and/or mentally ill.\n","11":"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:\nIt is reduced, dollar for dollar, if the individual has more than $____ in unearned monthly income, such as gifts, interest or rent. \nIt is reduced by one dollar for every two dollars earned if the individual has earned income (wages) above $_____ a month.\nIt is reduced by one third if the individual receives in-kind support and maintenance (i.e., food and shelter).\nFor eligible individuals, SSI pays up to $___ a month for food and shelter.\n","50":"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.\nWhen 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.\nWhen considering monthly expenses, list costs for items under such categories as:\nHousing\nCare assistance\nPersonal needs\nEducation\nTransportation\nMedical/dental\nFood\nSocial/recreational\nYour 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.\n","39":"[Note to speaker: replace “autism” with relevant condition based on audience.]\nOnce 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…. \nWhile 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.\n","56":"Pooled trusts, established by disability organizations, provide an alternative for families with limited assets.\n","12":"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:\nIf 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.\nIf 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.\nIf 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. \nA special needs attorney can help you plan ahead for this type of situation.\n","51":"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. \nIn 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. \nAn SNT also can be tailored to meet individual situations, such as the need for an advocate, care manager or conservator.\n","40":"What will happen to Nathan?\nAfter Nathan’s mom dies, his SSI will increase but his resources will not be sufficient to preserve his quality of life.\nNathan 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. \n","13":"Government decides amount of in-home support offered to Medicaid recipients.\nIn-home support can include paramedical services.\n","52":"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.\nWhether 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. \nAdditionally, 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. \n","41":"What plan of action could Nathan’s mom make to protect him after her death? \nNo 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.\nDisinherited: 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.\nNon-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.\nThird-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.\nFirst-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.\n","48":"As we’ve seen from Nathan’s situation, planning can make the difference between just getting by and enjoying a higher quality of life.\nThe first step is considering how you – and your child – envision the future. \n[Additional point]\nWhat unforeseen challenges could arise, such as medical complications?\n","54":"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.\nParents 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.\nFunding an irrevocable SNT removes the transferred assets from the parent’s taxable estate.\n"}
  • Special Needs CEU Presentation

    1. 1. Planning for a Loved One With Special Needs and Estate Planning for Parents of Persons with Developmental and Other Severe Chronic Disabilities
    2. 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. 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. 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. 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. 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. 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
    8. 8. Part 1: Understanding Public Benefits
    9. 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. 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. 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. 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. 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
    14. 14. How Benefits Work Together SSI Medicaid SSDI Medicare
    15. 15. Part 2: Making Decisions About the Future
    16. 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. 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. 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. 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. 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. 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. 22. Elements of a Special Needs Trust A Special Needs Trust (SNT) is drafted specifically so trust assets are not considered to be “countable resources” in determining the disabled person’s eligibility for public benefits based on need.
    23. 23. Elements of a Special Needs Trust The SSA describes a discretionary trust as “a trust in which the trustee has full discretion as to the time, purpose and amount of the distributions.” If the beneficiary has no discretion or mandatory rights over trust income or principal of the trust distributions, the trust is not counted in determining SSI eligibility.
    24. 24. Elements of a Special Needs Trust Assets in a SNT will not count as a resource for public benefits purposes. The assets in the SNT may be used to supplement the beneficiary’s needs not covered by public benefits without a reduction or elimination of those public benefits.
    25. 25. Examples of Permissible SNT Expenditures           Education Travel Expenses Newspaper and Magazine Subscriptions Personal Care Services Home Care Services Non-covered Medical Expenses Vacations Companions Entertainment National Review but not the NY Times
    26. 26. Does Every Person with a Disability Need a Trust? • • A trust is appropriate if it helps to achieve greater independence or reliable asset management. Always keep in mind that a trust by its nature means a loss of control over the funds by the disabled beneficiary (This can be a good theory ie; prodigal son or daughter)
    27. 27. Types of Special Needs Trusts 1. Self-Settled Trust 2. Third Party Trust This is a critical planning technique for parents, grandparents, and individuals who want to gift to actual/potentially handicapped persons, or person with severe medical illnesses.
    28. 28. Special Needs Trusts vs. Support Trust • If needs-based public benefits are either not needed or not anticipated by the disabled beneficiary, no need to establish a SNT. • If public benefits are not an issue, it may be appropriate to establish a support trust to provide financial oversight and administration for the disabled person’s behalf. A. (ie: a traditional support trust for non child with non-qualifying disabilities B. But… what about the future? What /individual’s health or disability significantly? SSI child or if that child deteriorates
    29. 29. Self-Settled SNT 1. Established with the assets of the disabled person - proceeds of a personal injury award or other court action, inheritances or gifts received before the creation of the trust. 2. Must be established by a parent, grandparent, guardian or a court. 3. The disabled person can be the only beneficiary of a self-settled SNT. No remainder beneficiaries may be named in the trust instrument.
    30. 30. Self-Settled SNT (cont’d) 4. Self-settled SNT must be inter vivo ( meaning exist prior to death) and be irrevocable. 5. Medicare and Medicaid liens must be paid before funding. 6. Self-settled SNT can be established only if the beneficiary is under age 65. 7. “Pay-back” provision to the state of NJ or Medicare is required by state and federal law. A. For Medicaid/ Medicare benefits actually paid
    31. 31. 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.
    32. 32. 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)
    33. 33. 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.
    34. 34. 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”.
    35. 35. 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”.
    36. 36. 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.
    37. 37. 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.
    38. 38. 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.
    39. 39. 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
    40. 40. 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?
    41. 41. 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
    42. 42. 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.
    43. 43. 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.
    44. 44. 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.
    45. 45. 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. 
    46. 46. 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.
    47. 47. Part 3: Creating an Effective Plan for Your Child / Loved One
    48. 48. 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?
    49. 49. 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
    50. 50. 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
    51. 51. 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
    52. 52. 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
    53. 53. Selecting an SNT Trustee Who should be the trustee?  Parent with professional co-trustee  Corporate or other professional trustee  Successor trustee
    54. 54. 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
    55. 55. 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
    56. 56. 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
    57. 57. 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
    59. 59. ADMINISTRATION OF SPECIAL NEEDS TRUSTS Presented by Fredrick P. Niemann, Esq. Hanlon Niemann, PC 3499 Route 9 North, Suite 1F Freehold, NJ 07728 www.hnlawfirm.com www.specialneedstrustnewjersey.com fniemann@hnlawfirm.com Elder Law, Asset & Estate Protection Planning, Medicare, Medicaid and Veteran’s Benefit Assistance Lawyers R. 1:40 Approved Mediator by the NJ Supreme Court Accredited Attorney by the US Veterans Administration for Veterans Benefits
    60. 60. Trust Administration A Special Needs Trust (SNT) must not only be properly drafted and funded, but must also be properly administered. Improper distributions from a properly drafted and funded SNT can result in the loss of public benefits for the beneficiary of the trust.
    61. 61. Self-Settled, Third Party and Marital SNTs The rules of administration apply to selfsettled, third party and marital SNTs.
    62. 62. Distributions May Be Income Even if the principal of a SNT is not considered a resource by public benefit providers because the trust was properly drafted, distributions from the trust MAY be considered income to the disabled beneficiary if not properly made.
    63. 63. Basic Rules for Trust Administration These basic rules define the types of distributions which may be made from a SNT and the impact of each type of distribution on the public benefits of the trust beneficiary. It is critical that trustees are aware of these rules.
    64. 64. Types of Trust Distribution 1. Direct Payments to the Beneficiary. 2. Payments to third party vendors for food, clothing or shelter. 3. Payments to third party vendors for items which are not food, clothing or shelter.
    65. 65. Direct Payments to the Beneficiary are NOT Permitted Cash paid directly from a SNT to a disabled beneficiary of needs-based public benefits is considered to be unearned income and will affect eligibility or the amount of any benefit received.
    66. 66. Example: Distributions from a SNT 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.
    67. 67. SSI - ISM + PMV 1. SSI is intended to pay for a beneficiary’s food, clothing and shelter. 2. Disbursements from a SNT by a trustee to a third party vendor to cover food, clothing or shelter costs result in the receipt of in-kind support and maintenance (ISM) by the beneficiary. 3. ISM is valued under the presumed maximum value (PMV) rule under which the SSI monthly benefit is reduced by one-third (1/3rd) of the federal benefit amount, or the actual value received, whichever is less.
    68. 68. Payments to Third Party Vendors for Food, Clothing or Shelter It is often appropriate to make distributions from a SNT which constitute ISM even though the beneficiary will have a reduction in public benefits to the extent of the PMV because the SSI benefit alone is inadequate to provide an appropriate level of food, clothing and shelter for the beneficiary.
    69. 69. ISM + Medicaid Eligibility As long as SSI eligibility is maintained, even at a reduced level, Medicaid eligibility is maintained.
    70. 70. Example: Distributions from a SNT to Third Party Vendors for Food, Clothing or Shelter Jill is the trustee of a testamentary special 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 constitute ISM and reduce Pamela’s SSI by one-third (1/3rd), the PMV.
    71. 71. Payments to Third Party Vendors for Items Which Are Not Food, Clothing or Shelter Distributions of this kind do not result in any reduction of benefits so they are the most desirable types of distributions for a trustee to make.
    72. 72. Example: Distributions from a SNT to Third Party Vendors for Items Which are Not Food, Clothing 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 New York Times. Joan arranges with the local newspaper distributor to deliver 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.
    73. 73. Types of Distributions Not Considered Food, Clothing and Shelter • Home improvements, repairs, and maintenance by outside source • Tools to perform home improvements or repairs • Installation of burglar alarm or monitoring/ response system home • School tuition, books, and supplies • Health and life insurance premiums
    74. 74. Types of Distributions Not Considered Food, Clothing and Shelter (Cont’d) • Entertainment, including books, magazines and newspapers; trips, movies, plays, museums and sporting events; audio/video equipment; hobby supplies, etc. • Vacation travel, but not lodging, since that is shelter • Purchase and maintenance of car, or bus passes • Household goods and other items of personal property of reasonable value • Payment for cleaning supplies and paper products
    75. 75. Types of Distributions Not Considered Food, Clothing and Shelter (Cont’d) • Telephone expenses • Dental care, physical therapy, massages, support services, and other medical costs not covered by any public benefit programs • Home care services not covered by another program • Durable medical equipment, such as wheelchairs
    76. 76. Examples of Trust Distributions Which Will Reduce SSI Benefit • Shelter-related expenses (mortgage payments, real property taxes, heating and cooling bills, electricity, water, sewage, garbage collection) • Groceries or meals • Items of clothing • Cash for any purpose
    77. 77. Other Types of Distributions Which May Effect Public Benefits Eligibility Income and resources of parents are deemed to minor children. Trust distributions to parents may be considered income to them and, therefore, may be deemed to minor children. If the children are public benefit recipients, distributions to parents may effect the eligibility of children.
    78. 78. Other Rules Governing Distributions Distributions should be made by the trustee to accomplish the intention of the grantor as set forth in the trust instrument. Distributions should be made to provide for the beneficiary’s needs.
    79. 79. Credit Cards In appropriate cases, it makes sense to consider providing the trust beneficiary with a credit card. Credit cards are loans and loans are not income. Even if the credit card is used for food, clothing, and shelter, it is still a loan. The credit card could be in the name of the individual beneficiary or the name of the trust.
    80. 80. SNT as Owner of Home • Home is an “exempt” asset. • A beneficiary of public benefits living in a home which he owns or which is owned by a SNT is NOT considered to be receiving ISM in the form of rentfree shelter.
    81. 81. SNT as Owner of Home Advantages 1. Many beneficiaries of SNTs do not have the capacity to manage residential real estate. 2. The home is protected from creditors and from the temptation to borrow against the home. 3. If beneficiary is married, trust ownership protects the home in the event of a divorce.
    82. 82. SNT as Owner of Home Disadvantages 1. If a self-settled SNT owns a home, the home is likely to be lost upon the death of the beneficiary due to the required pay back provision. 2. Family members or others who occupy the home must pay their pro rata share of the expenses.
    83. 83. SNT as Owner of Home • If a self-settled SNT is involved, parents should purchase the home. Will avoid pay back and no pro rata contribution needed. • If the SNT beneficiary is under age 55 and not likely to live to age 55, home should be owned by the beneficiary since NJ only seeks recovery of Medicaid benefits paid after age 55 from the estate of a deceased beneficiary.
    84. 84. SNT as Owner of a Home If possible, home should be purchased in cash. Payment of mortgage is ISM to the disabled person, each monthly payment being valued at no more than the PMV.
    85. 85. SNT as Owner of a Home Payment of other household expenses by a SNT may also constitute ISM. The following 10 items are the only expenses considered in determining whether the beneficiary has received ISM: Food Gas Mortgage Electricity Real Estate Taxes Water Rent Sewer Heating Fuel Garbage Removal
    86. 86. Additional Household Expenses If the trust pays for improvements or renovations to the home, e.g., renovations to the bathroom to make it handicapped accessible or installation of a wheelchair ramp or assistance devices, etc., the individual does not receive income. Disbursements from the trust for improvements increase the value of the resource and, unlike household operating expenses, do not provide ISM.
    87. 87. SNT as Owner of a Vehicle 1. Often a handicap-equipped van is required. Who should own the van? 2. Title - held by trust or family member? - liability for accidents - “pay-back” provision 3. Insurance - critical to have adequate insurance - trust may pay insurance costs 4. Document transportation needs of disabled person for Medicaid.
    88. 88. SNT as Owner of a Vehicle The difficulty with a SNT owning a van is that it is often impossible to obtain insurance for the trust. A simple solution - have the trust lease the van and pay all expenses, including insurance, gas, maintenance, etc.
    89. 89. SNTs and Section 8 Housing The Special Needs Trust should never pay the beneficiary’s rent in Section 8 Housing. Distributions from the trust are considered income to the tenant regardless of whether the distribution is made directly to the beneficiary or to a third party.
    90. 90. Recap of Distribution Rules for Special Needs Trusts • Do not pay cash to beneficiary • Do not pay cash to family of beneficiary under 18 years of age • Distribute to third party vendors • Retain public benefits counsel • Retain care manager
    91. 91. Recap of Distribution Rules for Special Needs Trusts (Cont’d) • Always pay: --Income taxes --Trustee fees --Attorney fees --Administrative costs --All regularly recurring expenses
    92. 92. Recap of Distribution Rules for Special Needs Trusts (Cont’d) • Try to avoid payment of : --Mortgage --Rent --Real estate taxes --Homeowner’s insurance --Utilities: Gas, Electric, Heat, Water, Sewer --Garbage removal --Food --Clothing
    93. 93. First Steps for Trustees Review the document with an attorney familiar with Special Needs Trusts Meet with the beneficiary and assess his or her needs Identify the public benefits which the beneficiary is receiving or for which he/she may be eligible Gather all of the assets subject to the trust Get tax identification number for the trust Meet with any care managers, advisors, or fiduciaries required by the trust agreement Seek assistance and hire advisors
    94. 94. How to Identify the Beneficiary’s Needs 1. Trustee should develop a wish list of goods and services to be purchased for the beneficiary. - List should be prepared by the beneficiary and the beneficiary’s friends and family 2. Trustee should obtain information from the beneficiary’s school records or life care plan. 3. Care manager performs an annual evaluation of the beneficiary which will help identify his/her needs.
    95. 95. Trustee Duties and Responsibilities 1. Trustees should hold periodic meetings to receive input and make decisions concerning distributions. 2. Expectations should be established. 3. An agenda should be maintained and minutes provided to participants.
    96. 96. Trustee Duties and Responsibilities (Cont’d) 4. Self-Settled SNTs - the trustee must balance the long and short-term needs of the beneficiary. 5. Third Party SNTs - trustee must consider the interests of the remainder beneficiaries.
    97. 97. Choose a Management System and Team to Carry Out Your Intent Many SNTs fail because of ill-equipped Trustees. A system of checks and balances works best in trust administration. Divide the duties into three categories: • Financial • Personal, including advocacy and care management • Accountability
    98. 98. Selection of Management Team Members Parent, sibling or friends Attorney Financial Institution Nonprofit Organization Co-Trustees Social Worker or Care Manager
    99. 99. SNT Trustee: Financial Manager The Trustee should be a person with expertise in money management and disability programs. Institutional trustees may provide investment acumen. Although a parent often wants a sibling to act as trustee, there is often an inherent conflict of interest. Since the sibling is usually named as a remainder beneficiary, he/she has an incentive to accumulate rather than distribute trust assets.
    100. 100. Investments Prudent Investor Rule - requires trustee to invest and manage trust assets “as a prudent investor would, by considering the purposes, terms, distribution requirements and other circumstances of the trust. N.J.S.A. 3B:20-11.3 Generally, a growth and income investment strategy is appropriate for a SNT.
    101. 101. SNT Trustee: Public Benefits Expert In addition to the usual challenges involved in managing a trust (financial acumen, record keeping, etc.), the trustee of a SNT has a more difficult job. He/She must know the rules of the applicable governmental programs, and must make and keep track of payments to third party vendors.
    102. 102. Trustee Duties: Surety Bond If there is no corporate trustee, a trust document may include provision requiring a surety bond for the individual. Since the trustee has very broad discretion as to how the trust income and principal are to be used, a surety bond might be considered as a way to safeguard trust assets. The bond should be in an amount equal to the trust assets. The amount the bond should be reviewed annually. The premiums can be paid by the trustee from trust income.
    103. 103. Trustee Duties: Accountings The trust document may also provide for annual accountings by the trustee. This enables the trust beneficiary and non-trustee family members to scrutinize the performance of the trustee. Public benefit providers always require accountings from trustees of self-settled SNTs.
    104. 104. Trustee Duties: Investments The trustee has an obligation to invest the trust assets in a manner designed to achieve the objectives of the trust. As a general rule, the duties of a trustee cannot be delegated. However, the Prudent Investor Act authorizes the delegation of the investment functions by trustee and relieves the trustee of liability for investment performance under certain circumstances.
    105. 105. Trustee Duties: Investments (Cont’d) An analysis must be made of the degree of risk which the beneficiary can tolerate, as well as the cash-flow needs of the beneficiary. Expenses, such as insurance premiums for a home or a van, medical expenses not covered by other sources and necessities not covered by other sources, must be considered in any analysis of the beneficiary’s cashflow needs. The trustee must educate the beneficiary and his or her family as to what are appropriate investment vehicles and expectations.
    106. 106. Trustee Duties: Recordkeeping It is crucial that the trustee maintain accurate records of assets, income and disbursements. SSA reserves the right to review all disbursements made to or on behalf of the beneficiary. The trustee’s records must clearly reflect the payee of each distribution and the purpose for which it is made. If a challenge is made by SSA that a distribution constitutes income to the beneficiary, the trustee must have accurate records to refute the challenge.
    107. 107. Trustee Duties: Reporting Requirements SSA requires certain reporting for all SSI recipients. The trustee must complete these reports in a timely manner, so that the beneficiary’s eligibility will continue. Existence of the SNT must be reported to SSA and a copy provided, if requested. Any change in the beneficiary’s address, employment, living arrangements or income must be reported, including distributions which exceed $5,000.
    108. 108. Trustee Duties: Appeals If the beneficiary receives notice of an adverse action, the decision must be appealed within ten days in order to maintain benefits during the appeal period. The trustee should request copies of all communications from SSA to the beneficiary.
    109. 109. Trustee Duties: Budgeting A trustee should establish a budget for the trust and the beneficiary at the outset of the relationship, and annually thereafter. The trustee will estimate the annual income on a conservative basis. Any large expenditures, such as for housing or transportation, should be deducted prior to estimating income. Taxes and trustee’s fees must then be deducted. The remaining income should then be broken down for use by the trustee in an appropriate manner on a monthly basis.
    110. 110. Trustee Duties: Tax Responsibilities The trustee is responsible for preparing and filing all federal and state tax returns for the trust. The trustee should also prepare and file all federal and state tax returns for the beneficiary in situations where the beneficiary is unable to file those tax returns him/herself.
    111. 111. Trustee Protector • A Trust Protector oversees how the trust is managed, without day-to-day involvement. • The Trust Protector reviews accountings and assessments from the care manager. • The Trust Protector may hire and fire the trustee or care manager without cause. • A Trust Protector can be a professional, family or friends.