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Please be advised – these figures are not necessarily
reflective of current numbers. You should check with your
local disability organization for current benefit data.
The DALE
LAW FIRM
Attorneys and Counselors
at Law
Serving the estate planning
needs of persons with
disabilities and their families
San Francisco
Walnut Creek
www.achievingindependence.com
All materials in this presentation
are copy written and are for
personal use only. Any
reproduction or commercial use
is forbidden.
Definition of Estate Planning
I want to provide for myself
and my loved ones during my
lifetime, and upon my
incapacity or death give what I
have to who I want, the way I
want, when I want, and if I can
save every last fee, tax or court
cost possible.
From Loving Trust
Trust Centered Planning
Kathy has multiple disabilities and
requires round the clock attendant
care paid partially by IHSS, and
supplemented by her parents with
occasional assistance from her
grandparents.
Trust Centered Planning
Kathy’s parents’ desire is that
she live as independently as
possible in the family home.
With the right assistance, it is
possible that Kathy could work
which has always been her
dream.
Trust Centered Planning
Revocable Living
Trust
Kathy’s parents
establish a
Revocable Living
Trust that has
instructions in it
about how they will
be provided for
during their
lifetime.
Trust Centered Planning
Revocable Living Kathy’s parents home
Trust is placed in the living
401K trust, and the living
trust is made the
owner or beneficiary
of all of her parents
Kathy’s parents assets.
establish a
Revocable Living
Trust that has
instructions in it
about how they will
be provided for
during their
lifetime.
Trust Centered Planning
Revocable Living Kathy’s parents home
Trust is placed in the living
401K trust, and the living
trust is made the
owner or beneficiary
of all of her parents
Kathy’s parents assets.
establish a Special Needs Trust
Revocable Living
Trust that has The living trust
instructions in it directs that upon their
about how they will death, Kathy’s share
be provided for will pass to her
during their Special Needs Trust.
lifetime.
Trust Centered Planning
Kathy’s grandparents want to assist her
upon their death. The grandparents each
have a substantial retirement plans and
would consider leaving a portion of their
plan to Kathy – if it does not interfere
with her public benefits.
They would also like to make gifts now
to assist Kathy to achieve her dream of a
profession some day.
Trust Centered Planning
Kathy’s
grandparents begin
making gifts to her
trust now to assist in Special Needs Trust
day to day needs and
to eventually be
used for vocational
training
Trust Centered Planning
401K
Kathy’s
grandparents begin
making gifts to her Under the advisement
trust now to assist in Special Needs Trust of the family attorney,
day to day needs and CPA and financial
to eventually be advisor, Kathy’s
used for vocational grandparents
designate a portion of
training
each of their
retirement plans upon
their death’s to her
Special Needs Trust.
Our Quest
How do you provide for Kathy for 70
years when
We don’t know what benefits will be
available or the eligibility rules
We don’t know if the agencies out there
will be available over the beneficiary’s
lifetime
We don’t know who will be the best
trustee
Providing for Persons with
Disabilities
Special Needs Trust
Basics
Setting Objectives
Proper planning will focus on
achieving as much
independence as possible for
the disabled beneficiary
Benefits alone should not be
the sole planning objective.
Elements of a Special Needs
Trust
The Social Security Administration describes a
discretionary trust as “a trust in which the
trustee has full discretion as to the time,
purpose and amount of all distributions.”
If the beneficiary has no discretion over the
distributions, the trust is not counted for SSI
eligibility.
Elements of a Special Needs
Trust
A Trust is a contract to control
property for the benefit of a
beneficiary to meet some
objective
A special needs trust is drafted
specifically so trust assets are
considered not to be "available
resources" in calculating the
disabled person's eligibility for
needs based benefits.
Elements of a Special Needs
Trust
The funds in the trust may then
be used to supplement the
beneficiary’s needs not covered
by public benefits without a
reduction or elimination of SSI,
MediCal of IHSS.
Examples -Supplemental Trusts
No part of the assets of this trust
shall be used to supplant or
replace public assistance benefits
of any county, state, federal, or
other governmental agency
which has a legal responsibility
to serve persons with disabilities
which are the same as or similar
to Matthew's.
Examples - Discretionary Trusts
In making any distribution, the Trustee:
• Shall consider any other known income or resources of the
beneficiary and reasonably available;
• Shall take into consideration all benefits available from any
government agency, such as Social Security disability
payments, Medicare, Medicaid (Medi-Cal), Supplemental
Security Income (SSI), In-Home Support Service (IHSS) and
any other special purpose benefits for which the beneficiary is
eligible;
• Shall consider resource and income limitations of any such
assistance program;
• Shall make expenditures so that the beneficiary's standard
of living will be comfortable and enjoyable;
• Shall not be obligated to or compelled to make specific
payments;
• Shall not pay or reimburse any amounts to any government
agency or department, unless proper demand is made by such
government agency and reimbursement is required by the
State;
• Shall not be liable for any loss of benefits .
Supplemental and Discretionary
Special Needs Trusts
A Supplemental Special Needs
Trust only allows distributions that
do not in any way reduce needs
based benefits
A Discretionary Special Needs
Trust allows greater flexibility but
requires greater skill in
administration.
SPECIAL NEEDS TRUSTS
Can be a testamentary trust as part of the
parent's living trust or will
Stand alone Special Needs Trust with a
pour-over provision in the parent’s living
trust
Allows other family members or loved
ones to contribute to the trust
The management issues in a Special
Needs Trust are different than most
Living Trusts
Allows greater privacy
Special Needs Trusts Can Be
Divided Into Two Categories
If the source of the fund are from
Special Needs Trust
3rd party
someone other than the benefits No recovery
upon death of
recipient, the trust is categorized as a beneficiary
Third Party Special Needs Trust
If the source of the funds of the
Special Needs Trust are from the
benefit’s recipient, then the trust is Special Needs Trust
categorized as a self settled or Self Settled
MediCal Payback
MediCal Payback Trust Medi-Cal
Recovery upon
Death of
Beneficiary
The Third party
or Estate
Planning Special
Needs Trust
Third-Party Trust
Social Security says
SI 01120.200 A 17
A third-party trust is a trust
established by someone other than Special Needs Trust
the beneficiary as grantor. For
example, a third-party trust may be
established by a grandparent for a
grandchild.
Be alert for situations where a trust is
allegedly established by a third party,
but in reality is created with the
beneficiary's property.
Third-Party Trust
SI 01120.200 A 17
A third-party trust can have
great latitude, and upon the death Special Needs Trust
of the beneficiary can be left to
anyone you wish except:
You cannot leave it to the Dale
Law Firm, PC
The Individual
Self Settled
MediCal
Payback Trust
Self Settled Special Needs Trusts
or MediCal Payback Trusts
SI 01120.203 B1.
Federal Law Allows A Disabled
Individual to Protect Their Own
Assets And Maintain Their SSI Special Needs Trust
AND Medi-Cal If The Special
Needs Trust
Which contains the assets of an
individual under age 65 and who is
disabled ; and
Self Settled Special Needs Trusts
or MediCal Payback Trusts
SI 01120.203 B1.
Federal Law Allows A Disabled
Individual to Protect Their Own
Assets And Maintain Their SSI Special Needs Trust
AND Medi-Cal If The Special
Needs Trust
Which is established for the benefit
of such individual by a parent,
grandparent, legal guardian or a
court; and
Self Settled Special Needs Trusts
or MediCal Payback Trusts
SI 01120.203 B1.
Federal law allows a disabled individual
to protect their own assets and maintain
their SSI AND Medi-Cal by utilizing a Special Needs Trust
Special Needs Trust….
….with the understanding that the State
will receive all amounts remaining in
the Trust upon the death of the
individual up to an amount equal to the
total medical assistance paid on behalf
of the individual under a State Medicaid
plan.
Pooled Special
Needs Trusts
MediCal Payback
Required
A pooled trust is a trust
SI 01120.203 B2a
It is sometimes called a “master
trust” because it contains the
assets of many different
individuals, each in separate
accounts established by
individuals, and each with a
beneficiary.
By analogy, the pooled trust is like
a bank that holds the assets of
individual accountholders.
The provisions of the SSI trust statute do
not apply to a trust containing the assets
of a disabled individual which meets the
following conditions:
The pooled trust is
established and
maintained by a
nonprofit association;
The provisions of the SSI trust statute do
not apply to a trust containing the assets
of a disabled individual which meets the
following conditions:
Separate accounts are
maintained for each
beneficiary, but assets are
pooled for investing and
management purposes;
The provisions of the SSI trust statute do
not apply to a trust containing the assets
of a disabled individual which meets the
following conditions:
NOTE: There is no age restriction
under this exception.
Who Established the Trust
Account
In order to qualify for the pooled trust exception, the
trust account must have been established by
the disabled individual himself/herself or by
the disabled individual's:
parent(s);
grandparent(s);
legal guardian(s); or
a court.
State Medicaid Reimbursement
Provision
To qualify for the pooled trust exception, the trust must
contain specific language that provides that,
…to the extent that amounts remaining
in the individual's account upon the
death of the individual are not retained
by the trust, the trust pays to the State
from such remaining amounts in the
account an amount equal to the total
amount of medical assistance paid on
behalf of the individual under the State
Medicaid plan.
State Medicaid Reimbursement
Provision
To the extent that the trust does not
retain the funds in the account, the
State must be listed as the first payee
and have priority over payment of
other debts and administrative
expenses except as listed in SI
01120.203B.3.a.
Providing for Persons with
Disabilities
Pitfalls to commonly
used strategies
Common Pitfalls
Gift to Minor Act
Accounts
Unstructured Beneficiary
Designations
Disinheritance
No planning at all
California Uniform Transfers
to Minors Act (CUTMA)
Once the child takes control of the account,
the child may then use the money for
purposes other than education – regardless
of the custodian's wishes.
If your family is applying for need-based
financial aid, having an CUTMA may
reduce the size of the benefits package or
result in a finding of ineligibility.
California Uniform Transfers
to Minors Act (CUTMA)
CUTMA accounts are considered available
resources for purposes of SSI eligibility
Custodian could purchase exempt resources
such as wheelchairs, wheelchair vans
Larger accounts may require a court ordered
trust that creates a reimbursement for Medi-
Cal benefits received upon the death of the
beneficiary
Unstructured Beneficiary Designations
Designating a retirement plan, insurance
policy or annuity directly to an SSI or
MediCal recipient will cause a reduction
or elimination of public benefits
401K
Beneficiary________
Unstructured Beneficiary Designations
Many IRAs or 401K s have as default that
the employees children are beneficiaries.
Example – Husband designates Wife as
beneficiary of his IRA. Mother predeceases
Father and no other designation is made. On
Father’s death, the IRA makes the children
beneficiaries by default. 401K
If one of the children is on SSI or MediCal,
Beneficiary________
benefits are lost until all the funds are spent
down.
No Planning at All
Dying intestate (without a will or trust)
will usually leave all or a portion of the
estate to the decedent's children.
Any child on SSI or MediCal will lose
eligibility until the inheritance is either
spent down, converted to a exempt
resource, or placed in a MediCal
Payback Special Needs Trust.
No Planning at All
A MediCal Payback Trust differs from
an estate planning Special Needs Trust
because
the trust must be established by a parent,
grandparent, legal guardian or court,
there is a lien upon death for any MediCal
used by the beneficiary, and
if the trust is established by a court, then
the courts will often require costly court
accounting.
The Achieving Independence Trust
4 Step Process
Step 1 Step 2
Clearly express your Choose a management
intent in your trust system and team to
and related documents carry out your intent
Step 4 Step 3
Update and review Develop a funding
steps 1-3 plan to fulfill your
periodically intent
Why is expressing intent so
important?
A well executed estate plan is going to
clearly state your intent so that in the event
that a future Trustee who does not know you
is administering the trust, it will be clear
what is expected.
A bare bones trust can only accomplish
limited objectives.
Why is expressing intent so
important?
The Special Needs Trust Special Needs Trust
should have broad
information for overall
guidance to the trustee and
advocate.
The journal of intent should
give more detailed Journal of
information. Intent
Think of the journal as a
ongoing documentation of
the beneficiaries needs.
Residential Needs
What kind of housing situation is acceptable?
What is not acceptable?
Should provision be made for a caregiver to
live in the residence?
Is it desirable that the beneficiary own a home
someday?
How is home to be maintained?
Social Needs
You may wish to specify what
social activities you encourage the
Trustee to support including
[ ] Special Olympics
[ ] participating in sporting
activities
[ ] attending sporting events
[ ] attending cultural activities
[ ] participation in art programs
[ ] participate in religious activities
[ ] other ____________________
Family
You might wish to include a provision
expressing your desire that
maintaining contact with Grantor's
family is a priority.
Typical expenditures that might be
allowed include
[ ]Purchase gifts to acknowledge events
such as birthdays, holidays, etc?
[ ]Pay for beneficiary to travel to to
family events
[ ]Pay for family members to visit
beneficiary
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