General
Q: What is the most important factor in determining whether a special needs trust is successful over the long term?
A:The Choice in trustee
Q: Who is available to act as trustee?
A: If the trust is funded during the parent's lifetime they are frequently in the best position to act as trustee.
If the parents are trustees during their lifetime the trust should provide direction on who will be the successor trustee when the parents are no longer able or interested to act. Perhaps either a corporate Trustee or a family member will be able to step into this role.
Most Estate or Elder Law Attorneys suggest a corporate Trustee that will be impartial/objective and to avoid family conflicts or if there is no family member available or willing to act as successor. Corporations are frequently unwilling to act as successor trustee for trusts with less than $150,000.00. Life’s Plan, Inc. is a not-for-profit corporate Trustee that is willing to serve as Trustee of trusts starting at as little as $10,000.
Some families create a private trust and name other family members as successor trustees. Aunts, uncles and siblings of the individual with a disability should all be considered as possible successor trustees. Families may also provide that if no successor is willing or available the assets can be transferred to a pooled trust.
Q: What is a pooled trust?
A: A pooled trust is a trust that is operated by a not-for-profit organization, like Life'sPlan, Inc., that anyone with a family member with a disability can join. The money for each person is accounted for separately.
Q: How do I decide whether an individualized trust or a pooled trust is better?
A: Deciding which type of trust depends on the specific family situation. There are several factors that seem to make the most difference to families in deciding between an individual or a pooled trust which is, the amount of money available, the amount of control over the trust, the age of the beneficiary and the availability of an appropriate trustee.
The more money that is going to be in the trust the easier it is to get a bank or trust office to act as trustee. Most banks will not act as trustee for a trust with less than $150,000. For families with less money than this who want a corporate trustee the Life's Plan individual or pooled trust may be a better option.
Families may not have a family member who has the time or ability to act as the trustee. For these families the Life's Plan individual or pooled trust may be the best option.
Q: What if I have created a supplemental needs trust and then my child inherits money and creates a "payback" trust?
A: All supplemental needs should be met using the funds in the "Pay Back" trust first. Since any of these funds remaining after the beneficiary's death will revert to Life's (capital (P)lan) 25% administrative costs and then to pay off Medicaid before distribution back to the family. So you should spend down the Payback first and wait to use the third party funds in the supplemental needs trust, only after all of the funds in the payback trust have been expended
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Third Party Supplemental Trust
Q: How can I make sure that my child with a disability has money as an adult?
A: By creating a supplemental needs trust with special language that protects your child's federal benefits while offering supplemental support.
Q: When should I create this trust?
A: As soon as possible. Having a special trust for your child gives other people who want to give money to your child a safe place to put the money. This is an important thing for grandparents and aunts and uncles to know about.
Q: How much money will I need to put in a supplemental needs trust for my child?
A: The first step to deciding how much money you need in a supplemental needs trust is to consider the needs of the individual with a disability and what it costs to provide for those needs now. Once you know the current costs a financial planner can help you determine how much money will be needed to meet the individuals' needs for their lifetime.
Some families have provided for a transfer to the SST of enough money to meet the supplemental needs of their family member and also create a private trust as an extra protection in case unexpected needs arise.
Q: When should I actually put money in a supplemental needs trust?
A: Funding a supplemental needs trust during the lifetime of the parents has a number of advantages. This permits extended family members to add money to the trust either through gifts or inheritance. In addition the funds would be available to the parents to continue to meet the needs of their child when their available cash has decreased.
A trust can also be funded with a transfer of assets upon the death of a parent or with life insurance benefits. Providing for a transfer to a trust at the death of the first parent will decrease the day-to-day expenses to the surviving parent.
Q: What options do I have for creating a trust?
A: You can create a private family trust or you can open either an individual or pooled account in the Life’s Plan Third Party Supplemental Trust.
Q: What is the difference between a special needs trust set up by a family member and a Life’s Plan special needs trust?
A: A special needs trust set up by the family will be as successful as long as the family member acting as trustee, knows what they’re doing in handling the trust itself, is knowledgeable about the rules and regulations from HFS and is fiscally responsible in administering the trust. A Life’s Plan special needs trust is set up by the family with Life’s Plan assigned as Corporate Trustee, we put together a life care plan in place for the beneficiary, we manage the trust with personalized care throughout its lifetime with 100% accuracy on providing the supplemental services for the beneficiary, while not jeopardizing any of their federal benefits.
Q: What if a family has created a supplemental trust and then the individual with a disability inherits money. Can the additional funds be added to the supplemental needs trust?
A: If the additional funds are added to the supplemental needs trust the trust will be considered an asset of the individual which is subject to either spend down or pay back.
A pay back trust should be created. All supplemental needs of the individual should be met using the funds in the pay back trust. Since any of these funds remaining after his/her death will first be paid to Life’s plan for Administrative costs and then reverts to the State before any distributions are made to the family. The third party funds should only be used after all of the funds in the pay back trust have been expended.
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Self Funded Payback Trust
Q: What can I do when my child with a disability receives a large amount of money from an inheritance or personal injury suit?
A: You can create a trust with special "payback" language to protect your child's benefits.
Q: What is the special "payback" language?
A: It is a provision in the trust that is required by the Federal government that must be included in an OBRA '93 Special Needs Trust and an OBRA '93 Pooled Trust. It provides that when your child dies the money remaining in the trust must be used to "payback" the Department of Human and Family Services for Medicaid costs.
Q: What options do I have for creating a trust?
A: You can create a private "payback" trust or you can open either an individual or pooled account in the Life'sPlan Self Funded Payback Trust.
Q: What is a pooled trust?
A: A pooled trust is a special needs trust that can only be operated by a not-for-profit organization like Life’s Plan, Inc. The pooled trust is a benefit designed for individuals with disabilities who have assets and are receiving federal benefits. In a pooled trust, the assets from the individual accounts are commingled together to create a greater return on investment. The money for each person is accounted for separately.
Q: How does participation in a payback trust affect public benefits?
A: The Centers for Medicare and Medicaid Services (CMS) of the United States Department of Health and Human Services has provided that assets of an individual which are placed in a trust of this nature will not count in determining Medicaid eligibility for the individual.
These assets will not count as resources in determining eligibility under the Supplemental Security Income (SSI) program.
These two federally-funded entitlement programs are the primary sources of means-tested support to people with disabilities.
Q: What options should be considered for payment of alimony to an individual who receives Social Security Benefits?
A: Alimony received by an individual does not affect his/her SSDI benefits. However, it will affect SSI benefits unless it is paid directly into a pay back trust or structured to require the ex-spouse to pay for services that are non support in nature such as car expenses or housekeeping.
Q: What options should be considered for payment of child support to an individual who receives Social Security Benefits?
A: Child support is deemed by the Social Security Administration to be income. If child support is paid into a pay back trust it will not jeopardize benefits.
Q: What options should be considered for payment of a Workers Compensation Award to an individual who receives Social Security Benefits?
A: A Workers Compensation Award can be paid to a pay back trust without jeopardizing benefits.
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