SPECIAL NEEDS TRUSTS. THE BASICS: What you need to know

Transcription

1 SPECIAL NEEDS TRUSTS THE BASICS: What you need to know

2 Presenter Karen Currie Trust Associate at Commonwealth Community Trust MBA from Clark University Commonwealth Community Trust (CCT) National nonprofit pooled trust organization that administers pooled third-party and self-funded special needs trusts for individuals with disabilities. CCT has served over 950 clients since 1990 and is currently managing over $30 million dollars in trust funds for its clients. Charitable Fund Award Program for financially needy individuals with disabilities to purchase equipment, medication, and services

3 Introduction Financial planning is always challenging for families, particularly when planning for an uncertain future. For families who have a loved one with a disability, additional considerations should be taken into account to ensure the best possible outcomes. In this presentation, we will cover the basics of special needs trusts that family members and care providers must know in order to understand what a special needs trust is, and to determine whether a special needs trust should be established for an individual with a disability.

4 Agenda Why consider a special needs trust? SNT Terminology Third-party funded v. self funded special needs trusts Choosing the right trustee The Pooled Trust option How does it work? What now? Additional resources Questions?

5 Why consider a special needs trust? When might an individual receive a large sum of money? Inheritance, Personal injury award Other situations? Special concerns when that individual has a disability: 1. They may need help managing the funds 2. They may need to qualify for means tested benefits 3. You may want to leave specific instructions as to how the trust will be utilized by/for your loved one Let s explore these concerns further by discussing the potential benefits of an SNT.

6 Why consider a special needs trust? Benefit #1. Fiduciary Oversight If you are concerned that your loved one may need help managing funds, a special needs trust (SNT) will put into place a trustee who has responsibility over making sure funds for your loved one are: (among other things) 1) used for their sole benefit, 2) properly managed/invested, 3) spent prudently.

7 Why consider a special needs trust? Benefit #2. Public Benefits Eligibility An SNT will allow for funds to be available for supplemental needs for the benefit of your loved one that will not count as a resource for means tested benefits. SSI and Medicaid are the main benefits that will be protected by a properly drafted and administered SNT. To qualify for these benefits, an individual cannot have over $2,000 in assets. Sometimes, an SNT will also protect access to benefits such as food stamps, subsidized housing, and other similar services. Can these public benefit programs be a beneficial tool for providing resources or care for your loved one now or in the future?

8 Why consider a special needs trust? Benefit #3. Advocacy/Instructions Establishing an SNT is an opportunity for you to seriously consider how your loved one s life may change in the future, and to give instructions about their care, living arrangements, and other needs that must be met. This is a component of special needs planning that should not be forgotten, especially if you are funding the SNT for your loved one you have the opportunity to guide the use of those funds to make sure your wishes are carried out.

9 SNT Terminology Beneficiary: the trust is for the benefit of Grantor: authorizes transfer of funds into the trust Trustee: person or entity that has fiduciary responsibility. The trustee cannot be the beneficiary Irrevocable: cannot be revoked. The trust can be amended or terminated only under specific circumstances provided for in the trust itself Remainder: any funds that are left in the trust when the beneficiary passes away

10 Third Party funded v. Self funded SNTs The basic difference: Whose assets are funding the trust? Example 1: A parent wants to establish a trust for their child with a disability that will be funded through a life insurance policy. The parent includes language in the policy to leave funds to the special needs trust for the benefit of their child. Funds belong to the parent: THIRD PARTY FUNDED TRUST Example 2: An individual who was disabled due to an accident is receiving funds from a personal injury award settlement. Funds belong to the individual: SELF FUNDED TRUST

11 Third Party funded v. Self funded SNTs The basic difference: Whose assets are funding the trust? Example 3: A well-meaning grandparent has left an inheritance in their will to a grandchild who has a disability and receives SSI and Medicaid benefits. A trust needs to be established in order to retain the individual s public benefits. SELF-FUNDED TRUST. Why? Funds belong to the individual - the inheritance was left directly to the individual. Either an SNT was not set up in advance, or the beneficiary designation language in the will was not corrected to direct funds to the SNT.

12 Third Party Funded SNT Must be funded by someone other than the beneficiary Often established by the grantor in advance as a planning tool, and funded at some later date (when the grantor passes away, for example) Often a gift or inheritance, but the SNT must be recipient, not the beneficiary The beneficiary can be any age There is no Medicaid payback clause required. The remainder beneficiary designation is often made within the trust document.

13 Self-Funded SNT The assets funding the trust are the beneficiary s own assets. The grantor must be either a parent, grandparent, legal guardian, or the Court. Self-funded pooled trusts can be established by the beneficiary May be subject to Medicaid payback if claims have been paid on the beneficiary s behalf. Must be irrevocable. The beneficiary must be younger than 65 Note: an individual can have both types of SNT.

14 Choosing the Right Trustee The ideal trustee will: Utilize the funds for the sole benefit of the beneficiary Maintain accurate accounting Keep the best interest of the beneficiary in mind Understand public benefits and keep up with changing rules Wisely invest the trust assets and follow fiduciary requirements Who is right for the job?

15 Choosing the Right Trustee What may impact this choice? The amount of assets that will fund the SNT The type of assets that will fund the SNT Is a family member or trusted individual willing to serve as trustee, or would a professional trustee be a better choice? Who provides professional trustee services? Attorneys Financial institutions Nonprofit pooled trust organizations

16 The Pooled Trust option A Pooled Special Needs Trust is operated by a nonprofit organization Cross between a traditional SNT and a 401k Beneficiaries do not draft their own trust documents, but instead join the trust by completing a Joinder Agreement Funds are pooled for investment purposes, but individual accounting is kept for each subaccount Benefits of pooled trust: Often have low or no minimum funding requirement and lower administrative fees Staff should be knowledgeable about rules regulating public benefits and stay current on any changes Staff are often sensitive to the needs of individuals with disabilities

17 How does it work? Funds must be kept in a specific account Any disbursements must be carefully accounted for Any non-exempt expenditures or cash to the beneficiary will be counted as income for SSI benefit calculation Procedure for disbursements at CCT Advocate(s) is designated One page payment request form Requests are evaluated Approved disbursements are processed as a check payable directly to the vendor

18 What now? Consider the future needs of your loved one and their ability to provide for themselves after you are gone Is a special needs trust right for your family? Determine what resources will fund the trust Meet with an estate planning attorney familiar with special needs planning Establish a trust, Letter of intent Update all beneficiary designations, notify anyone who may leave your loved one an inheritance/monetary gift Revisit the trust periodically or if your family situation changes

19 Additional Resources Special Needs Alliance The Voice : Great articles about a variety of SNT topics Find an Attorney tool (or call CCT to ask if we know of an estate planning attorney in your area) Special Needs Calculator Tool (Met Life) Social Security Administration Spotlight on Trusts

20 Questions? Feel free to contact CCT with questions or for more information. CCT enrollment documents, FAQs, and fee schedules are available at our website: Executive Director: Joanne Marcus (804) My