Q & A 2


Q: What is the most important factor in determining whether a special needs trust is successful over the long term?
A: The quality of trust document originally drafted and just as important the selection of the trustee.

Q: Who is available to act as trustee?
A: If the trust is funded during the parent’s lifetime they are frequently the best option 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 another family member like a sibling will be able to step into this role.

Most Estate or Elder Law Attorneys suggest a corporate Trustee that will be impartial/objective to avoid family conflicts and if there is no family member available or willing to act as successor the family has limited options. Corporate trusts are frequently unwilling to act as successor trustee for trusts under $500,000. Life’s Plan, Inc. is a not-for-profit corporate Trustee that is willing to serve as Trustee of trusts starting with as little as $10,000.

Some families create a private trust and name siblings or 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 must also consider potential conflicts of interest between siblings and family. Maybe one sibling to the special needs brother/sister is the guardian while the other sibling is assigned the trustee, good idea. Even this set up can be fraught with problems and conflict. Siblings may not always like each other or there is a past of mistrust. What happens if the sibling trustee is also a remainder beneficiary from the special needs trust in which they manage for their brother. Maybe they are less likely to disburse monies out for the benefit of the special needs sibling because of their own future stake in the trust assets as remainder beneficiary or perhaps they may self deal from the trust with no one holding them accountable with checks and balances unless the special needs child has a guardianship case established with a judge overseeing annual distributions.

Selecting family members or siblings is often the first choice in selecting successor trustees to a special needs trust. But not always the best choice with conflicts of interest, lack of ability to manage or unwillingness to take on this fiduciary obligation. These are complicated trusts with laws constantly changing around them. Trustees must not only be sound and honest fiduciaries, but must continue to stay on top of the legal limits to use of Special Needs trust as laws can change over time. Even those family members with the best intentions to manage a Special Needs trusts can make big mistakes.

Q: What is a pooled trust?
A: A pooled trust is a trust that is operated by a not-for-profit organization, that anyone with a family member with a disability can apply to join. The money for each person is accounted for separately. The trust is already established using a “Master” trust document and pre-approved as “non-countable” for government benefits such as SSI and Medicaid.

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 and their families who have assets and are receiving public benefits. In a pooled trust, the assets from each subaccount are accounted for separately. While the whole sum of all the beneficiaries’ assets are commingled together in the same portfolio for a greater return on investment.

Q: How do I decide whether an individualized trust or a pooled trust is better?
A: Deciding which type of trust will depend on the specific family dynamics for the individual with disabilities. There are several factors that are essential in a successful long term plan for families to decide on between using an individual stand alone trust versus a pooled trust option. First the amount of money available for the individual with disabilities which will correlate to trustee and future trustee selection choices, amount of control over the trust by the family will also depend on the amount of assets available, the age of the beneficiary and finding an appropriate trustee and successor trustee.

The more money that is going to be in the trust the easier it is to get a bank or trust company to step in as trustee. Most banks will not act as trustee for a trust with less than $500,000. For families with less than $500,000 the corporate trustee option will not work, in many guardianship case involving self settled monies a judge may also not allow a parent or family member to act as guardian of the person and act as trustee for the disabled ward for a variety of reasons good or bad. The family member may be too close to the money to handled it with impartiality with possible concerns of self-dealing or they may just not be good with handling money. Also, there may be too much on responsible weighing on the guardian of the person for the judge to ask them to become a trustee with little knowledge of Special Needs trusts. A pooled trust may be the best option.

Families may simply not have a family member who has the time or ability to act as the trustee. For these families the pooled trust would make a lot of sense with expertise in managing special needs trust the family can have confidence knowing a quality trust is in place to insure an improved quality of life for a loved one with a disability.

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 spent first using the funds in the “Pay Back” trust. Since any of these funds remaining after the beneficiary’s death will revert to pay back to the state for Medicaid costs before any distribution can be made to the family. Pooled trusts also retain a percentage prior to pay back to the state. So you should spend down from Payback trust first and wait to use the third party funds in the supplemental needs trust last , only after all of the funds in the payback trust have been exhausted

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 an OBRA D4A “Individual” or D4C Pooled trust as long as it has special “payback” language in the trust language to insure protection of your child’s public benefits. A D4A OBRA trust requires the beneficiary be 64 or under.

Q: What is the special “payback” language?
A: It is a provision in the trust that is required by the Federal government 42 USC 1396p D(4), that must be included in an OBRA ’93 D4A “Individual” Special Needs Trust and the OBRA ’93 “Pooled” Trust. It provides that when your child dies the money remaining in the trust must be used to “payback” the state in which medical assistance was paid for through Medicaid during their lifetime.

Q: What options do I have for creating a trust?
A: You can create an individual D4A “payback” trust or you can open a subaccount with a pooled trust through a transfer trust agreement to establish a Self Funded Payback Trust.

Q: What options do I have for creating a trust?
A: You can create an Individual stand along private trust (3rd party/OBRA D4A Individual payback trust) with a qualified attorney with the flexibility to select your trustee which will also be dependent on the assets available. As well there is always the pooled trust option to set up as successor trustee assignment o on your stand alone trust for the future protection of these assets, or in family emergencies and there is no estate plan a pooled trust can be efficient in consulting with confused family members to successfully transfer over assets left directly to a beneficiary with a disability. Or there may just not be enough money to find a corporate trustee where a family does not have interest in managing a small Special Needs trust then the pooled trust becomes a viable option.

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 programs are key as the primary source of funding to meet the daily needs of 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 Special Needs trust whether 3rd party or Payback kin. In a structured settlement it should be required that the ex-spouse pay for services that are non supportive in nature such as car expenses and 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 3rd party or Payback trust, it will not jeopardize public 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 also paid to a payback trust without jeopardizing public benefits.

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 public benefits while offering supplemental supports and services.

Q: When should I create this trust?
A: As soon as possible. It is always a good idea to have a estate plan for your family. When it comes to planning with someone with a disability in the family it is imperative to not limit yourself or your child’s needs with state’s idea of planning through probate court. Families often want to leave more money to a special needs child in the planning process. Having a special needs trust for your child gives other people the ability to leave money in a safe place, the trust provides that safe place improving the overall quality of life for a child with special needs which is what you ultimately want for them. This is very important for grandparents and aunts and uncles to know about and understand how important this really is.

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: 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 for a financial planner who can help you determine how much money will be needed to meet the individuals’ needs for their lifetime over and above the public benefits funding.

Some families with limited assets can leave a final transfer from a will or life insurance policy through use of testamentary trust plan directly to a pooled trust with little to no cost. This will insure enough money is available to meet the supplemental needs of their family member with a disability in a 3rd party trust account as an added extra protection to the family in case something unexpected would happen to a parent or family member.

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 SSA/HFS and is fiscally responsible in administering the trust. A pooled special needs trust is pre-existing with a trustee already in place ready to go to aid in efficiently and effectively establishing a trust on behalf of a beneficiary with disability with an expert trustee ready to handle all the complications that go with these types of trusts The pooled trust assigned as Corporate Trustee, we put together a life care plan, sort of like a letter of intent with a long term plan in place for the sake of the beneficiary, we manage the trust with personalized care through case management services throughout the lifetime of the trust with providing the supplemental support and services for the beneficiary, while not jeopardizing any of their public 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. This is an easy mistake that can happen, so it is so very important to never commingle monies from SSA back payments or other monies titled directly in the beneficiary’s name with a 3rd party trust.

A second trust would have to be created as an OBRA pay back trust. If it’s a small amount of money then a pooled trust might be the sensible choice establishing a payback trust. All supplemental needs of the individual should be met using the funds in the pay back trust first. Since any of these funds remaining after his/her death will first be paid to the State before any distributions can be made to the family. The third party funds should only be used after all of the funds in the pay back trust have been exhausted.