SNT for CVLS 2008 05 20

Document Sample
SNT for CVLS 2008 05 20 Powered By Docstoc
					Supplemental Needs Trusts
                               Presented by
                             Larry R. Rivkin
                            on behalf of CVLS
                                       May 20, 2008

               185 MILWAUKEE AVE., SUITE 235, LINCOLNSHIRE, ILLINOIS 60069
  PHONE (847) 793-2484 • FAX (847) 793-2485 • EMAIL • WEB
     Public Benefit Programs
                   Non-Means   Means
                     Tested    Tested
         Income      SSDI        SSI
         Medical    Medicare   Medicaid

                                       Supplemental Needs Trusts
Page 2                                              May 20, 2008
     Exempt Assets
        $2,000
        Homestead property
        Personal effects and household goods
        Motor vehicle
        Life insurance (with restrictions)
        Burial funds and burial space
        Self-support resources

                                         Supplemental Needs Trusts
Page 3                                                May 20, 2008
         Historical Choices
            Lose benefits
            Disinherit child

                                Supplemental Needs Trusts
Page 4                                       May 20, 2008
   Trust Solution for Third-Party Funds
     760 ILCS 5/15.1 (Sept. 1991)
            Authorizes SNTs for funds outside disabled
             person’s control
            Trust assets exempt
            No government reimbursement at death
            Created by anyone except the disabled person

                                                 Supplemental Needs Trusts
Page 5                                                        May 20, 2008
     Trust Solution for Disabled
     Person’s Funds
   OBRA Payback Trust (d-4-A Trust) (Aug. 1993)
        Authorizes SNTs for funds in control of
         disabled person under 65
        Created by parent, grandparent, legal guardian,
         or court
        Trust assets exempt during life
        Government reimbursement at death

                                                Supplemental Needs Trusts
Page 6                                                       May 20, 2008
     Alternative to Free-standing Trust
   Pooled Trust (d-4-C Trust) (Aug. 1993)
        Funds pooled for management purposes under common trust agreement with joinder
        No age requirement
        Created by disabled person, parent, grandparent, legal guardian, or court
        Trust assets exempt during life
        Government reimbursement at death
        Factors to consider
                Account minimums

                Trustee of pooled trust may retain investment control

                Some pooled trusts dictate disposition of assets after disabled person’s death and

                  government reimbursement
                Fees

                                                                              Supplemental Needs Trusts
Page 7                                                                                     May 20, 2008
     Examples of IL Pooled Trusts
     (see handout)
        Illinois Disability Pooled Trust
        Options for Living
        Life’s Plan

                                            Supplemental Needs Trusts
Page 8                                                   May 20, 2008
     Primary Terms of
     Supplemental Needs Trust
        Make trust irrevocable but give limited
         power to amend to comply with law
        Express grantor’s intent
        Limit distributions
          For “supplemental needs” only
          In trustee’s sole discretion (no standards)

          To providers of goods and services - not to

           disabled person
                                          (Continued … )

                                                 Supplemental Needs Trusts
Page 9                                                        May 20, 2008
     Primary Terms of
     Supplemental Needs Trust (cont’d)
         Avoid distributions for food or shelter until all
          benefits are exhausted (will reduce SSI)
         Name trustees and successor trustees
         Remainder beneficiaries at death (after Medicaid
          reimbursement for d-4-A trust)
         Parents can be trustees and remainder
          beneficiaries if they have no estate tax exposure
          and if they are not trying to qualify for public
          benefits themselves

                                                 Supplemental Needs Trusts
Page 10                                                       May 20, 2008
     Timing of Trust Creation and
         When to create SNT?
             As soon as present or future need is anticipated
         When to fund SNT?
             15.1 – usually at death of parent, grandparent, or other
              family member or close friend
             d-4-A –
                  Prior to disabled person’s application for SSI or Medicaid if
                   disabled person has over $2,000 of assets without spend down
                  Thereafter if disabled person receives assets
         How much to fund SNT???

                                                                Supplemental Needs Trusts
Page 11                                                                      May 20, 2008
     Coordination with Other Estate
     Planning Documents
         Critical to update
           Wills of parents, grandparents, etc.
           Insurance and retirement plan beneficiary

         So that no assets pass directly to disabled
          child; all assets for disabled child should be
          allocated to SNT

                                               Supplemental Needs Trusts
Page 12                                                     May 20, 2008
     Common Drafting Issues
         Stand-alone SNTs preferred to embedding SNT in a
          will or revocable living trust
         Disabled person should not:
             Be a beneficiary of a one-pot trust (such as a family trust)
              that has multiple beneficiaries
             Have withdrawal rights over an ILIT
         Termination – recommend avoiding kick-out
         Provisions when grantor might also qualify for
          Medicaid or SSI

                                                         Supplemental Needs Trusts
Page 13                                                               May 20, 2008
     Government Resources
         Social Security Administration – Administers
          SSI Program (
         Department of Healthcare and Family
          Services – Administers Medicaid Program in
          IL (

                                           Supplemental Needs Trusts
Page 14                                                 May 20, 2008
     Local Private Resources
         Protected Tomorrows (
             Life care planning , service coordination, and advocacy
             SSI and Medicaid eligibility planning
         Family Benefit Solutions (
             SSI and Medicaid eligibility planning
         PACT, Inc. (
             Life care planning, service coordination, and advocacy
             Trusteeship
         Life Care Innovations (
             Life care planning, service coordination, and advocacy

                                                                Supplemental Needs Trusts
Page 15                                                                      May 20, 2008
     Sample Family Situation
         Family Members
             Mom and dad
             Three children – one with severe CP
             Grandparents
         Assets
             Equity in home
             401(k)’s
             Life insurance
             Child with CP has own assets from gift or settlement

                                                       Supplemental Needs Trusts
Page 16                                                             May 20, 2008
         Be conservative!
         Review sample forms
         Questions

                                Supplemental Needs Trusts
Page 17                                      May 20, 2008

Shared By: