Special Needs Trusts and Guardianships: Protecting Government - - PowerPoint PPT Presentation

Special Needs Trusts and Guardianships: Protecting Government Benefits for the Disabled

Crafting and Administering First- and Third-Party Trusts and Addressing the Interplay Between SNTs and Guardianships Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

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.

THURSDAY, DECEMBER 20, 2012

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

Michael J. Keenan, Attorney, Keenan Law, Glastonbury, Conn. Beth C. Manes, Counsel, Wacks & Hartmann, Morristown, N.J.

Sound 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 1-866-961-9091 and enter your PIN 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 Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.

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

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

attendees at your location

• Click the SEND button beside the box

FOR LIVE EVENT ONLY

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.

• 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.
• Print the slides by clicking on the printer icon.

SPECIAL NEEDS TRUSTS & GUARDIANSHIPS:

PROTECTING GOVERNMENT BENEFITS OR THE DISABLED

Michael J. Keenan, Esq.

Keenan Law, LLC Glastonbury, CT

michael@keenan-law.com

www.keenan-law.com

5

• 1. General support trusts not appropriate
• 2. Informal approach not appropriate
• 3. Update beneficiary designations
• 4. Inter vivos trust preferred

PRESERVATION OF GOVERNMENT BENEFITS

www.keenan-law.com

6

• 1. Beneficiary has no control over trust
• 2. Trust will supplement, but not replace

government benefits

DISTINGUISHING CHARACTERISTICS OF A SPECIAL NEEDS TRUST

www.keenan-law.com

7

TWO TYPES OF SPECIAL NEEDS TRUSTS

• 1. Third-party trust
• 2. Self-settled trust ("D4A" Trust)

www.keenan-law.com

8

TRUSTEE CONSIDERATIONS

• 1. Financial management experience
• 2. Good bookkeeping
• 3. Understands trust provisions
• 4. Has sound judgment & discretion
• 5. Genuinely interested in beneficiary's well-

being

• 6. Discuss conflicts of interest
• 7. Provide a “Letter of instruction”
• 8. Consider a trust protector
• 9. Consider a professional trustee

www.keenan-law.com

9

PUBLIC BENEFITS CONSIDERATIONS

www.keenan-law.com

10

DEFINITION OF "DISABILITY"

• 1. Substantial gainful activity is not possible
• 2. Physical or mental impairment
• 3. Condition will result in death or last for at

least 12 months

www.keenan-law.com

11

PROGRAMS THAT DO NOT HAVE ASSET/INCOME LIMITATIONS

• 1. Medicare
• 2. Social Security Disability Insurance (SSDI)

www.keenan-law.com

12

MEDICAID

• 1. Categorical eligibility
• 2. Asset limitation
• 3. Exempt assets
• 4. Spend-down
• 5. Gifting not allowed

www.keenan-law.com

13

SUPPLEMENTAL SECURITY INCOME (SSI)

• 1. Monthly cash payments
• 2. Eligibility requirements similar to Medicaid

(except gifting)

• 3. Effect of income

www.keenan-law.com

14

TAX ISSUES

www.keenan-law.com

15

INCOME TAX

• 1. Third-party special needs trust
• 2. Self-settled special needs trust

www.keenan-law.com

16

GIFT TAX

• 1. Irrevocable third-party special needs trusts
• 2. Revocable third-party special needs trusts

www.keenan-law.com

17

ESTATE TAX

• 1. Third-party special needs trust
• 2. Self-settled special needs trust

www.keenan-law.com

18

Guardianship and Special Needs Trusts

Beth C. Manes, Esq. www.maneslaw.com beth@maneslaw.com

19

Guardianship

 Varies from state to state

 Guardianship v. Conservatorship

 Some states have adopted the Uniform

Guardianship and Protective Proceedings Act (UGA)

20

Guardianship

 Who needs a guardian? UGA definition of

incapacity: “unable to receive and evaluate information or make or communicate decisions to such an extent that the individual lacks the ability to meet the essential requirements for physical health, safety, or self-care, even with appropriate technological assistance.” UGA §102(5).

21

Guardianship

 Who should be the guardian?  Things to consider:

 Is the ward a minor?  Location of ward and proposed guardian.  Physical and emotional needs of the ward.  Age of the proposed guardian.

22

Guardianship

 How broad should guardianship be?

 Person  Property  Limited

23

Guardianship

 Procedure under the UGA

• 1. Petition
• 2. Personal Service
• 3. Visitor
• 4. Evaluation

a) Guardianship b) Conservatorship

• 5. Hearing

24

Guardianship

 Burden of Proof

 To establish guardianship or conservatorship: clear and

convincing evidence

 To remove guardianship or conservatorship: prima facie

evidence  If possible, ward can give consent

25

Guardianship

 Monitoring under the UGA  Guardians: 30 days then annually  Conservators: must file a plan and an inventory within 60

days then annual reports

 Both guardian and conservator must make

recommendations as to whether the guardianship or conservatorship should be continued or modified

 Bond may be required

26

Guardianship

 Duties of Guardian

 Decisions regarding health, education, maintenance and

support

 Ward shall participate in decisions to the extent possible  Guardian shall consider values and desires of ward

27

Guardianship Duties pursuant UGA §314(a)-(b)

 To become or remain personally acquainted with

the ward and maintain sufficient contact with the ward to know of the ward’s capacities, limitations, needs, opportunities and physical and mental health.

 To take reasonable care of the ward’s personal

effects and bring protective proceedings if necessary to protect the property of the ward.

28

Guardianship Duties pursuant UGA §314(a)-(b)

 To expend money of the ward that has been

received by the guardian for the ward’s current needs for support, care education, health and welfare.

 To conserve any excess money of the ward for the

ward’s future needs, but if a conservator has been appointed for the estate of the ward, the guardian shall pay the money to the conservator, at least quarterly, to be conserved for the ward’s future needs.

29

Guardianship Duties pursuant UGA §314(a)-(b)

 To immediately notify the court if the ward’s

condition has changed so that the ward is capable

• f exercising rights previously removed.

 To inform the court of any change in the ward’s

custodial dwelling or address.

30

Guardianship Powers pursuant UGA §315(a)

 Apply for benefits, both public and private  Take custody of and establish residency for ward  If conservator has not been appointed, Guardian

may initiate action to compel a person to support the ward

 Consent to medical care, with some limitations

31

Guardianship Powers pursuant UGA §315(a)

 Consent to marriage or divorce  Delegate certain responsibilities to the ward  Consent to adoption of the ward.

32

Guardianship Rights pursuant UGA §316(a)(b)

 Reasonable compensation  Reimbursement  Not liable for acts of ward

33

Guardianship Reports pursuant UGA §317(a)-(b)

 Ward’s participation in decisions and the need for

continuing guardianship;

 Living arrangements;  Services provided to the ward (including but not

limited to medical educational);

 Activities of guardian (including visits with ward);  If ward is institutionalized, guardian’s opinion as to

appropriateness;

 Plans for future care;  Opinion as to need for, or recommended changes

to scope of, guardianship.

34

Conservatorship

 Difference between guardianship and

conservatorship

 Responsible for financial decisions  Must maintain fiduciary accounts (separate from

• ther wards)

 Inventory of assets  Annual accountings

35

Conservatorship

 Be wary of ward who wants to maintain some

control

 Small allowance  Bank card

 Gifting  Estate planning  Medicaid planning

36

Special Needs Trusts

 Self-settled – person must be disabled  Third-party – can be in anticipation of disability  Pooled/Community

37

Self-settled Trusts

 To qualify for exclusion from being counted as

asset of beneficiary (pursuant to U.S.C. §1396(d)(4)(A):

 Trust must be for the benefit of one individual who is:

• Disabled
• Under the age of 65

38

 (cont’d)

 Trust must be established by the parent, grandparent, or

guardian of a disabled person or by the court;

 Trust must be irrevocable;

39

 (cont’d)

 Trust must give the trustee sole and absolute discretion

• ver the use of corpus and income of the trust; and

 Trust must provide for repayment to the state of money

paid for the benefit of the beneficiary pursuant to the state’s Medicaid plan.

40

Pooled Trust

 To qualify for exclusion from being counted as

asset of beneficiary (pursuant to U.S.C. §1396(d)(4)(C):

 Trust must “contain the assets of” a disabled individual;  Trust must be both established and managed by a non-

profit association;

41

 (cont’d)

 Trust must be treated as a separate trust for accounting

purposes, but be pooled with assets held for other beneficiaries for investment and management purposes;

 Trust must include a separate account established for the

individual beneficiary by his or her parent, grandparent, guardian, court or him/herself;

42

 (cont’d)

 Trust must provide for repayment to the state for

Medicaid payments to the extent that money remains in the account upon the beneficiary’s death are not retained by the trust.

• Interpretation varies from state to state.

43

Third-party Trusts

 Created by one person for the benefit of another and

funded exclusively with assets not belonging to the beneficiary.

 No pay-back provision is necessary.  Should be purely discretionary:  Prohibit trustee from making distributions directly to

beneficiary

 Direct trustee to consider effect of distributions on public

benefits eligibility.

44

Distributions from Special Needs Trusts

 Stricter for self-settled than for third-party.  Beware of in-kind support and maintenance (ISM).

45

Permissible Distributions from Special Needs Trusts

 Non-covered medical expenses  Vehicle  Burial space, prepaid funeral  Clothing and personal items  Travel  Educational, vocational, social and personal

services.

46

Practice Tips

 Guiding the client to select a trustee  Separate memorandum giving guidance to trustee

– not part of document

 Incorporating special needs planning into estate

planning

 Special considerations in divorce context

47