Planning for Families With Children Who Have Special

NeedsCarolina Institute for Developmental Disabilities

November 11, 2015

Anthony D. NicholsonMcPherson, Rocamora, Nicholson & Nordgren, PLLC

3211 Shannon Road, Suite 620, Durham, NCanicholson@macrolaw.com

www.macroclaw.com919-493-0584

Topics to Discuss

•Planning Considerations– Basic Estate Planning Documents– Guardianship

•Letters of Intent•Special Needs Trusts

– Types of SNTs– Distributing Funds from SNTs– Selection of Trustee

•Miscellaneous Planning Considerations

Planning Considerations

• Will– Guardian

• Special Needs Trust• Guardianship During Lifetime

– Before 18– Alternative-General Power of Attorney and

Health Care Power of Attorney– Standby Guardianship

Prepare Letter of Intent

• Family Information and addresses• Residential Care-Past, Present and Future• Education, including past record, current enrollment,

specialty teachers, future educational goals, special interests and talents

• Social, Behavioral & Personal Relationships• A Typical Day• Medical Information• Important Contacts• Final Expression of Love and Hope

Have you planned effectively for your child who has special needs?

• Problem-If child with special needs has over $2,000 or receives over $2,000, eligibility for most government benefits is automatically lost.– Does your will leave money or property to your child

with special needs?– Is your child a beneficiary, or contingent beneficiary of

your life insurance, IRA, or other retirement plan?– Have grandparents, siblings or others named the child

beneficiary or contingent beneficiary of a will or life insurance policy?

Common Needs-Based Benefits

• SSI – Supplemental Security Income – $733/month Maximum– Disability Determination

• Medicaid – Automatically Eligible if Receiving SSI

• CAPS – Medicaid Waivers – CAP C, DA, Innovations, Choice

Non-Countable Assets

• Home• One Vehicle• Furnishings and personal effects• Property approved by SSI for self support (for

example office equipment)• Life Insurance and/or burial policy worth less

than $1,500• $2,000 cash or cash equivalents

Solutions-What Should You Consider?

• Disinherit the Child• Leave the Child’s share to a Sibling or other

Relative• Plan for Child with a Will and “Special Needs”

Trust• Division of Assets Between Children

Overview of Special Needs Trusts

• Trust: An agreement by which one person (the trustee) holds property for the benefit of another (beneficiary)

• Special Needs Trust: Trust created for the benefit of a person with disabilities who is receiving or may receive “needs-based” public benefits

The “Special Needs” Trust

• Essential purpose is to improve the quality of an individual’s life without disqualifying him or her from eligibility for public benefits

• Assets in trust are not counted as a resource• Assets supplement rather than supplant

government benefits• Overall Planning Goal: to achieve as much

independence as possible for the beneficiary. Ideally, beneficiary becomes wage-earner who no longer needs public benefits or the SNT

The Trustee

• Choice of Trustee can be difficult

• Qualities of the Trustee– Good Judgment– Investment Acumen– Good Record Keeping Abilities– Not Struggling Financially– Willing to Seek Advice on Public Benefits,

Investment and Taxes

Trustee Choices

• Individual Trustee- Sibling, Relative or friend– Successors needed if person dies or becomes

incapacitated

• Professional Trustee• Combination of individuals and

professionals as co-trustees• Non-profit organization that operates a

pooled trust

Two Kinds of Special Needs Trusts

• Third Party SNTs

• First Party SNTs–Also called Self-Settled SNT, Medicaid Pay-back SNT or d(4)(A) SNT

Third Party SNTs

• Funded with assets of parents, grandparents, or siblings (third parties) and not the beneficiary

• Not subject to Medicaid payback• Discretionary Distribution Standard• Lots of Guidance to Trustee Regarding

Distributions

Third Party SNTs (continued)

• Created in Will• Created as a “Stand Alone Trust”

– Revocable verses Irrevocable– Can be a receptacle for gifts or bequests from

others as well as parents’ assets at death– Family members can leave property directly to trust

Funding of Trust at Death

• Beneficiary Designations for Life Insurance, IRAs, etc. should name trust as beneficiary not child

• Wills should state any distribution to child with special needs is distributed to Trust

First Party SNTs

• Established by parent, grandparent, guardian or court (and perhaps soon by the beneficiary) for a disabled person under 65 years of age

• Funded with the personal assets of the disabled person–normally inheritance or personal injury settlement

• Trust is subject to Medicaid Payback• Trustee can be individual, trust company or a non-profit

corporation• Must be for the “sole benefit” of the disabled person

ABLE Accounts

• Can be a Good Alternative to 1st Party SNT

• Limited to $14,000 per year

• Bank account that will not disqualify person from needs-based benefits

• Good for relatively small amounts of money – wages, small inheritance

• Medicaid Payback Required

• Not Good for Parents’ Money

DISTRIBUTIONS FROM SPECIAL NEEDS TRUSTS

Distributions from SNT – Cash

One option: Pay cash directly to beneficiary

– DON’T DO THIS – cannot help beneficiary

• If more than $20 in any month, will reduce beneficiary’s SSI payment dollar-for-dollar

• If cash exceeds beneficiary’s SSI payment, beneficiary loses not only SSI (bad enough), but also Medicaid (much worse)

Distribution from SNT – In-KindIn-Kind Income: non-cash distributions given directly to

beneficiary or that beneficiary receives because someone else pays for it.

Four Ways to Distribute In-Kind Income:• Direct – Trustee delivers items to beneficiary

• Indirect – Trustee pays provider, provider delivers to beneficiary

• Credit Card – Beneficiary purchases item with credit card (Note: not ATM or cash advance card)

• Restricted Debit Card - True Link

Distribution from SNT – In-Kind

–Two types of In-Kind Distributions:

In-Kind Support and Maintenance (ISM) – food or shelter

Non- ISM – Everything else (for example, a wheel-chair equipped van, computer, books, trip to Disney World, etc.)

In-Kind Support and Maintenance (ISM)

“Food or shelter that a person is given or that

is received because someone else pays for

it.”

Bag of groceries, meal at restaurant

Rent payment made by

Trustee to landlord

Distribution from SNT – Shelter (ISM)9 (and only 9) household operating expenses that are ISM:

1. Mortgage (including property insurance if required by the mortgage holder)2. Real property taxes3. Rent 4. Heating fuel5. Gas 6. Electricity 7. Water 8. Sewer 9. Garbage removal

Distribution from SNT – Shelter( Not ISM)

So any other shelter items (those not listed on previous slide) are NOT ISM. Examples:

• Telephone• Cable TV• Condo fees• House cleaning• Painting• Plumbing • Renovation (e.g., wheelchair ramp)• etc.

Distribution from SNT

Non-ISM: No limitation (in federal law) on amount that can be given SNT beneficiary

Family holiday Education

Pets & Pet Care Entertainment

Other Planning Issues

• Transition from teen to adulthood– Guardianship, Public Benefits, Housing– Post Secondary Education – Beyond

Academics• Housing

– Promoting Independence– Living at Home v. More Independent Setting– Preparing for Life After Parents – housing,

arrangements for primary advocate/caregiver.– Finding Appropriate Supports– Group Homes, Alternative Family Living

Finding a Special Needs Attorney

• Understanding of public benefits planning

• Experience in drafting special needs trusts

• Knowledge of general estate planning including wills, trusts, etc.

Resources

• www.SpecialNeedsAlliance.com• www.SSA.gov• www.thearc.org • www.nylspecialneeds.com• www.nami.org