Presenting a live 90 ‐ minute webinar with interactive Q&A Leveraging Special Needs Trusts g g p to Obtain Public Benefits Crafting First Party, Third Party, and Pooled Special Needs Trusts WEDNES DAY, JUNE 15, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Evan H. Farr, CELA, Farr Law Firm , Fairfax, Va. Edward Zetlin, Edward Zetlin Law , Arlington, Va. Martha C. Brown, CELA, Martha C. Brown & Associates , S t. Louis, Mo. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Evan H Farr CELA Evan H. Farr, CELA L Leveraging Special Needs Trusts to i S i l N d T Obtain Public Benefits 703-691-1888 evanfarr@farrlawfirm.com
Special Needs Trusts: Typical Clients Typical Clients • Parents planning for a disabled child; Parents planning for a disabled child; • Disabled individuals coming into an • Disabled individuals coming into an inheritance or winning or settling a personal injury claim; or injury claim; or • Healthy spouse planning for a disabled spouse. H l h l i f di bl d Evan Farr, CELA | Farr Law Firm 6
The Client’s Concerns • How to leave funds for the benefit of a child without causing the child to forfeit important public benefits? • How do you make sure that the funds are well managed? • How do you make sure that other children are not over ‐ burdened with caring for the disabled sibling? • What is fair in terms of dividing the estate among a disabled child and other children? • How do you make sure there’s enough money to meet the disabled child’s needs? Evan Farr, CELA | Farr Law Firm 7
Why a Special Needs Trust? • First , public benefits programs are often i inadequate. d • Second , both public benefits programs and individual circumstances change over time. • Third , in the situation where a parent thinks it , p is appropriate to rely on other children to take care of the disabled sibling, an undue burden g, arises and can strain relations between them. Evan Farr, CELA | Farr Law Firm 8
Two Primary Functions • To manage funds for someone who may not be able to do so himself or herself due to bl d hi lf h lf d disability. • To preserve the beneficiary’s eligibility for public benefits, whether that is Medicaid, Supplemental Security Income (SSI), public housing, or any other means ‐ based benefit program. Evan Farr, CELA | Farr Law Firm 9
Two Main Categories • Third ‐ Party SNT: one person creates and f funds for the benefit of someone else d f h b fi f l • First ‐ Party SNT: (also called d4a trusts) created for the person with special needs using that person’s own money. Evan Farr, CELA | Farr Law Firm 10
The General Rule • Funds held by a self ‐ settled trust are considered available to a disabled beneficiary id d il bl di bl d b fi i and render him ineligible for important b benefits. fi Evan Farr, CELA | Farr Law Firm 11
The Two Exceptions: two types of "self ‐ settled" trusts self settled trusts • Fortunately, both Medicaid and SSI allow two types of "self ‐ settled" trusts (also called “f “first ‐ party” trusts) that ” ) h • (d)(4)(a) Trusts – normally (d)( )( ) ll permit a beneficiary to: for a single beneficiary; and – Shelter his/her own funds; • (d)(4)(c) Pooled Trusts – – Qualify for public benefits; where trust accounts for and and multiple beneficiaries are pooled and invested – Remain a continuing together. beneficiary of the trusts. beneficiary of the trusts. Evan Farr, CELA | Farr Law Firm 12
First Party Special Needs Trusts • Any funds remaining in • Also Known as: the trusts upon the the trusts upon the – (d) (4) (A) trust beneficiary’s death be – “Pay ‐ back” Trust used to reimburse the used to reimburse the – Single ‐ beneficiary State for any Medicaid self ‐ settled trust expenditures it has made on the beneficiary’s behalf. Evan Farr, CELA | Farr Law Firm 13
First ‐ Party vs. Third ‐ Party Special Needs Trusts Needs Trusts • A third ‐ party SNT cannot hold funds belonging to the disabled individual himself. • First ‐ Party SNT can help set aside some or all of the money for supplemental needs and still allow the money for supplemental needs and still allow the person to receive public benefits without any period of disqualification. • First ‐ Party SNT can still be used as a tool to set aside some or all of the money for supplemental needs and y pp allow the person to re ‐ obtain public benefits. Evan Farr, CELA | Farr Law Firm 14
Third Party Special Needs Trusts • For Whom? – Generally, for parents who want to leave assets to a special needs child p – Because the SNT will own the assets, the beneficiary will not become ineligible for beneficiary will not become ineligible for government benefits. Evan Farr, CELA | Farr Law Firm 15
Third Party SNTs • Can serve to hold inheritance that may come f from family member. f il b • Cannot hold funds belonging to the disabled individual himself. • Can be created during the client’s life by using g y g a revocable or irrevocable living trust, or upon death through a living trust or through a Last g g g Will and Testament. Evan Farr, CELA | Farr Law Firm 16
Third Party SNTs (Continued) • Allows the beneficiary to receive vital public b benefits fi • Funds can be used for the special needs beneficiary to improve care and quality of life until his or her own death • Any assets left in trust can pass to anyone you name in the trust document. Evan Farr, CELA | Farr Law Firm 17
Pooled Special Needs Trusts • created by a nonprofit organization • may act as the trustee of the pooled SNT, or it may select the trustee • individuals have separate accounts in the pooled SNT p • all the money is pooled together and invested by the trustee by the trustee Evan Farr, CELA | Farr Law Firm 18
Benefits of the Pooled SNT • Individual beneficiaries get the services of a professional trustee and more investment f i l d i options because there is more money overall. • A third ‐ party pooled trust provides a way to benefit from a special needs trust without having to actually create one. Evan Farr, CELA | Farr Law Firm 19
First Party Pooled Special Needs Trusts vs Third ‐ Party Pooled Special Needs vs. Third ‐ Party Pooled Special Needs Trusts • “First ‐ Party” pooled SNTs – also called “(d)(4)(C)” “(d)(4)(C)” trusts – used to protect money that d h belongs to the special needs beneficiary. • “Third ‐ Party” pooled SNTs (which you can use y p ( y to give money during life, or leave money upon death, for a special needs beneficiary) and , p y) Evan Farr, CELA | Farr Law Firm 20
Unlike the individual payback trust – i e the (d) (4) (A) i.e., the (d) (4) (A) . . . • Pooled SNTs may be for beneficiaries of any age and may be created by the beneficiary d b d b h b fi i himself. Evan Farr, CELA | Farr Law Firm 21
Requirements to Obtain Medicaid and SSI Medicaid and SSI • Pooled SNTs must be created and managed by a non ‐ profit non ‐ profit. • At beneficiary's death, Federal law says the state does not have to be repaid for its Medicaid does not have to be repaid for its Medicaid expenses on her behalf as long as the funds are retained in the trust for the benefit of other disabled beneficiaries. – Some states require repayment. • In most states, anyone over age 65 who makes a h k transfer to a first ‐ party SNT will incur a transfer penalty penalty. Evan Farr, CELA | Farr Law Firm 22
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