What is a Special Needs Trust?
Special needs text on a wooden cubes on a wooden background

What is a Special Needs Trust?

Supplemental Security Income and Medicaid are critical sources of support for those with disabilities, both in benefits and services.

To be eligible, a disabled person must satisfy restrictive income and resource limitations.

That’s why many families ask elder law and estate planning attorneys about the two types of special needs trusts.

Moberly Monitor’s recent article, “Things to know, things to do when considering a special needs trust,” explains that with planning and opening a special needs trust, family members can hold assets for the benefit of a family member, without risking critical benefits and services.

If properly thought out, families can continue to support their loved one with a disability long after they’ve passed away.

After meeting the needs of their disabled family member, the resources are kept for further distribution within the family. Distributions from a special needs trust can be made to help with living and health care needs.

To establish a special needs trust, meet with an attorney with experience in this area of law. They work with clients to set up individualized special needs trusts frequently.

Pooled trust organizations can provide another option, especially in serving lower to more moderate-income families, where assets may be less and yet still affect eligibility for vital governmental benefits and services.

Talk to an elder law attorney to discuss what public benefits are being received, how a special needs trust works and other tax and financial considerations. With your attorney’s counsel, you can make the best decision on whether a special needs trust is needed or if another option is better, based on your family’s circumstances.

Reference: Moberly Monitor (October 27, 2019) “Things to know, things to do when considering a special needs trust”

What Can You Tell Me About a Special Needs Trust?

A special needs trust is a specific type of trust fund that’s created to help a beneficiary with special needs but not jeopardize their eligibility for programs, like Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) and Medicaid. KAKE’s recent article, “How a Special Needs Trust Works,” says that programs like SSDI and Medicaid can be vital supports for those dealing with disabilities or chronic illnesses.

These programs have income limits to ensure they’re serving those who need them the most. If you were to just give money to your beneficiary when you pass away, it could come in above this income limit.

A special needs trust works around this. That’s because the owner of the funds is technically the trust, not the beneficiary. You also name a trustee to be in charge of disbursing the funds in the trust. Therefore, while the beneficiary benefits from the trust, she doesn’t have control of its assets.

If you are creating a special needs trust for a beneficiary, you must do this before the beneficiary turns 65. And funds from the trust typically can’t be used to pay for food or shelter.

If a person could benefit from a special needs trust, but they themselves own the funds, you can create a first-party special needs trust in which you serve as both the beneficiary and the grantor. These can be complicated to draw up, and states have varying rules determining their validity. A first-party special needs trust has the money that belongs to its beneficiary.

With a third-party special needs trust, the trust holds funds that a beneficiary doesn’t directly own. These are generally used by grantors to allow the beneficiary to start getting money from the trust, even before their death. The funds never technically belong to the beneficiary, so they can’t be used for Medicaid payments. The trust can be used to save money for the beneficiary and future beneficiaries.

The third type of these trusts is the pooled special needs trust. Nonprofit organizations manage assets for a fee, and these organizations pool the funds of multiple trusts together and invest them. When it comes to payments, beneficiaries get an amount equal to their percentage of the pooled trust’s balance.

A special needs trust lets you write down what you wish your funds’ purpose to be, making it legally binding. Special needs trusts are irrevocable, so you can also protect your funds from creditors and lawsuits against the trust’s beneficiary. It lets you help your beneficiary deal with the expenses that come with illness or disability, without hampering their ability to get other assistance.

Reference: KAKE (September 30, 2019) “How a Special Needs Trust Works”

 

What Should I Know About Medicaid?

Medicaid is the federal program that gives healthcare benefits to those who cannot afford them. Many people who end up requiring long-term care can pay for it out of their own their own assets, at least initially.

However, because long-term care expenses are so astronomical, many people end up accessing Medicaid benefits, after their own assets have been depleted.

The Medicaid program can help with paying for home care, assisted living, and nursing home care, explains Insurance News Net’s recent article, “Medicaid planning.”

It would be great if people would plan to qualify for Medicaid before they become completely broke, which would preserve their children’s inheritance.

For those who are thinking of transferring all of their assets to their children to qualify for Medicaid, the government has already thought of that. If you gift any assets to your children, you must wait 60 months from the date you gave the gift before becoming Medicaid eligible. However, there are perfectly legal strategies that a senior can use to become eligible for Medicaid, while still keeping considerable assets.

That’s why you should talk to an elder law or Medicaid planning attorney. These practitioners specialize in helping people qualify for Medicaid benefits far in advance of their assets becoming depleted.

Assets may be freely transferred between spouses to help gain eligibility for a spouse that needs care.

There are also many assets that are exempt for purposes of gaining eligibility. This includes a primary residence, rental property, certain IRAs and most vehicles.

It’s also important to remember that a person can enter into contracts with family members to provide care in exchange for a fee, without a 60-month look back.

With the guidance and planning from qualified legal counsel, seniors who require long-term care can get free government healthcare, while preserving assets for their heirs.

Please contact an experienced Medicaid planning or elder law attorney for additional information.

Reference: Insurance News Net (September 29, 2019) “Medicaid planning”

Can You Protect Your Home If You Need Medicaid?

Anyone who owns a home, whether a magnificent mansion or a modest ranch, worries about the possibility of losing the home because of long-term care. How can they keep the home for their spouse or even for their family, if they need to apply to Medicaid for long-term nursing care costs?

The problem, reports The Mercury in a recent article “Protecting your house and Medicaid” is often the strategies that people come up with on their own. They usually don’t work.

The first thought of someone who is confronted with the need to qualify for Medicaid is to immediately transfer ownership of the family home to another person. The idea is to take the home out of their countable assets. But unless the person who receives the house is an adult child, that transfer only leads to problems.

Medicaid’s basic premise is that if you can afford to pay for your own care, you should. Transfer of a home, let’s say one with a value of $400,000, means that a $400,000 gift has been given to someone. There is a five-year lookback period. Any assets given away or transferred in that five-year period means that you had the asset under your control. Medicaid will not pay for your care in that case.

There are some exceptions to the gifting rules, but this is not something to be navigated without the help of an experienced elder law estate planning attorney. Here are the exceptions:

Your spouse. It’s understood that your spouse needs a place to live, and a transfer of the home to your spouse does not result in penalties under Medicaid rules. This usually means transfer from title as joint tenants with rights of survivorship or tenants by the entireties to the healthier wife or husband. It is also understood that a transfer to your spouse at home is not a disqualifying transfer. This is a common practice and part of Medicaid planning.

A disabled child. A parent may transfer a house to their disabled child on the theory that it is needed for self-support. It is not necessary for a child to lose a home, because a parent will be on Medicaid. This is a common mistake, and completely avoidable. Talk with an elder law attorney to learn more.

If a child is a caretaker. An adult child who moves in with the parents for a period of at least two years to care for them so they could stay at home and avoid going to a nursing home, or if the child has lived with their parents for longer than that and they need this care at home, under federal law the home can be transferred to the child without penalty and the parent can go to a nursing home and receive care under Medicaid. This is another very common mistake that causes adult children to be left without a home.

For a person who is single or a widow or widower who will never move home after moving into a Medicaid certified nursing home, the house may be sold, and planning can be done with the proceeds of the sale. Paying bills to maintain a vacant home for no reason and having the government take the home as a creditor through the estate recovery program does not make sense. An elder lawyer estate planning attorney can help navigate this complex and often overwhelming process.

Reference: The Mercury (July 31, 2019) “Protecting your house and Medicaid”

Why an Attorney Should Help with a Medicaid Application

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Elder law attorneys can be very helpful when planning for Medicaid coverage, and they can save money in the long run, ensuring that you (or a loved one) get the best care. Instead of waiting to see how wrong the process can get, says The Middletown Press, it’s best to “Use a lawyer for Medicaid planning” right from the start. Here’s why.

Conflict of interests. When a nursing home refers a family to people for preparing the Medicaid application, very often the person has dual loyalties: to the nursing home who refers them the work, and to the family who will pay them a fee for help with applying for benefits. Whose interests comes first?

Everyone wants the Medicaid application to be successful, but let’s be realistic. It’s in the nursing home’s best interest that the resident pays privately for as long as possible, before going on Medicaid. It’s in the resident or family member’s best interest to protect the family’s assets for care for the resident’s spouse or family.

An attorney has a duty of loyalty only to her client. She also has an ethical and professional responsibility to put her client’s needs ahead of her own.

Saving money is possible. Nursing homes in some areas cost as much as $15,000 a month. While every market and every law practice is different, it would be unusual for legal fees to cost more than a month in the facility. With an experienced attorney’s help, you might save more than her fee in long-term care and probate cost. Most attorneys will consult with new clients at little or no cost to determine what they need and what they want to achieve before paying a larger fee.

The benefit of experience. It’s all well and good to read through pages of online information, but nothing beats the years of experience that an attorney who practices in this area can bring to the table. Any professional in any field develops knowledge of the ins and outs of an area and applying for Medicaid is no different. Without experience, it’s hard to know how it all works.

Peace of mind from a reliable, reputable source. Today we hear a lot about “FOMO,” or fear of missing out. Consulting with an experienced attorney about a Medicaid application will help you avoid years of wondering, if there was more you could have done to help yourself or your loved one.

There are multiple opportunities for nursing home residents to preserve assets for themselves and spouses, children and grandchildren, particularly when a family member has special needs. However, here’s a key fact: if you wait for the last minute, there will be far less options than if you begin planning long before there’s a need to apply for Medicaid.

Reference: The Middletown Press (July 29, 2019) “Use a lawyer for Medicaid planning”

How to Plan for Long-Term Care Costs

The odds are that most of us will need long-term care. At least 52% of those over age 65 will need some type of long-term care at some point in our lives, according to a study conducted by AARP. As most of us are living longer, we’ll probably need that care for a longer period of time, as reported in the article “It’s best to plan for long-term care” from the Times Herald-Record.

Here’s the problem: ignore this issue, and it won’t go away. This is a fairly common response for people 55 and older. The size of the problem makes it a bit overwhelming, and the cost to tackle it seems unsolvable. However, not addressing it becomes even more expensive. How can we possibly pay for long-term care insurance?

Here’s a simple example: a 64-year-old woman who broke her ankle in three places. She was healthy and mobile. However, a badly broken ankle required extensive rehabilitation and she was not able to stay in her home. She has been living at a rehabilitation center and the costs are mounting. What could she have done?

There are two basic ways (with a number of variations) to pay for long-term care.

The first and most obvious: purchase a long-term care insurance policy. Only 2.7 million Americans own these policies. They are wise to protect themselves and their families.

Most families put off buying this kind of insurance, because it’s expensive at any age and stage. The average cost is about $2,170, according to the Kiplinger Retirement Report, for about $328,000 worth of insurance. That rate varies, and it should be noted that if you have a chronic condition, you may not be able to purchase a policy at all.

If a local nursing home costs $216,000 per year and you have $328,000 of coverage, you’ll run out of coverage. The average nursing home stay is about two years. As boomers age, the cost of long-term care insurance is rising, while benefits are becoming skimpier, says Kiplinger.

There are some alternatives: a hybrid life insurance plan that includes long-term care coverage.  However, those can be more expensive than regular long-term care insurance. Try about $8,000 a year for a 55-year-old, about $13,000 for a 65-year-old.

Another choice: a Medicaid Asset Protection Trust. You’ll need to work with an estate planning attorney to create and fund this trust long before you actually need it. Your assets must be placed in the trust five years before an application to Medicaid, which will then pay for your care. You don’t have to live in poverty to do this. If the care is for one person, the applicant is permitted to keep about $15,450 of assets. The spouse may also keep a home worth up to $878,000 and assets up to about $120,000. In New York State, you can keep the principle of retirement funds like an IRA or 401(k), as long as you are taking the required distribution withdrawals.

However, what if you have money to pay or need long-term care before you put assets in trust? If you live in New York, Florida and Connecticut, you have what is called “spousal refusal.” The spouse of the person in long-term care can choose not to pay for their cost of care. This can get complicated, and Medicaid will try to get funds for the care. However, an estate planning elder law attorney can negotiate the amount of payment, which may leave the bulk of your estate intact.

These are complicated matters that become very costly, often at a time when you are least able to deal with yet another issue. Speak with an estate planning attorney before you need the care and learn how they can help you protect your spouse and your assets.

Reference: Times Herald-Record (July 22, 2019) “It’s best to plan for long-term care”

Advance Planning Key for Alzheimer’s Patients

A retired physician and his wife have allowed a local television station to report their family’s journey with Alzheimer’s over the course of the last four years. The series continues with WCCO CBS Minnesota’s article “’All Lined Up Before You Need It’: Alzheimer’s Association Shares Steps for Estate Planning,” with four steps to take, if you notice that a family member is having memory lapses or trouble with simple tasks.

The Quinn family—Dr. Paul Quinn and his wife Peg—had some tough conversations years ago, when Paul’s memory was better, and when he was able to be completely honest with his wife about his wishes and what the couple would need to do moving forward.

Peg Quinn said that getting everything lined up long before it’s needed, is very important.

If there’s any sign of cognitive decline, there are legal and financial steps that must be pursued. Start with addressing the family budget and projected medical costs for long term care. If possible, gather all family members together for a planning session.

If they live in different parts of the state, or of the country, ask the family members to travel for a weekend family meeting. This is the kind of planning that is better when everyone is physically present.

Start by naming a power of attorney. It needs to be someone who is aware of the situation and will be able to make decisions on your behalf. An estate planning attorney can assist with making this decision.

Next, establish an advance directive with a focus on medical decisions. This may be the toughest part, since it is impossible to know how long someone will live with Alzheimer’s. The average patient lives four to eight years, according to the Alzheimer’s Association. The cost of care can add up fast—as much as $5,000 to $7,000 a month in some cases.

That’s why the next step—selecting an elder law estate planning attorney is so important. Planning for long-term care, qualifying for Medicaid and other benefits, is a complex challenge.

Dr. Quinn expressed his wishes to stay in his home as long as possible. However, his wife admits that he can’t stay focused on any projects for very long. The familiarity of their home makes life much easier for both of them, so they agreed early on to have in-home care, if it’s ever needed.

An estate planning attorney will help the family, by drafting estate planning documents and creating a plan as early as possible. A last will and testament must be created and executed before the person is legally incompetent. The same goes for a power of attorney and any health care power of attorney documents. Medicaid planning should be done as soon as possible, since there is a five-year look back period concerning transferring any assets.

Reference: WCCO CBS Minnesota (July 23, 2019) “’All Lined Up Before You Need It’ : Alzheimer’s Association Shares Steps for Estate Planning”

BEST OF OMAHA!

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Being BEST OF OMAHA fits perfectly with our mission and core values. Our MISSION is to help families design, share and preserve their legacy for future generations, through careful legal planning and lifetime relationships. Our core values include:
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What Are the Basics About Trusts?

Forbes’s recent article, “A Beginner’s Guide To Reading A Trust,” says that as much as attorneys have tried to simplify documents, there’s some legalese that is still hanging around. Let’s look at a few tips in reviewing your trust.

First, familiarize yourself with the terms. There are basic terms of the trust that you’ll need to know. Most of this can be found on its first page, such as the person who created the trust. He or she is frequently referred to as the donor, grantor or settlor. It is also necessary to identify the trustee, who will hold the trust assets and administer them for the benefit of the beneficiaries and any successor trustees.

You should next see who the beneficiaries are and then look at the important provisions. See if the trustee is required to distribute the assets all at once to a specific beneficiary, or if she can give the money out in installments over time.

It is also important to determine if the distributions are completely left to the discretion of the trustee, so the beneficiary doesn’t have a right to withdraw the trust assets.  See if the trustee can distribute both income and principal.

The next step is to see when the trust ends. Trusts will end at the death of a beneficiary.

Other important provisions include whether the beneficiaries can remove and replace a trustee, if the trustee must provide the beneficiaries with accountings and whether the trust is revocable or irrevocable. If the trust is revocable and you’re the donor, you can change it.

If the trust is irrevocable, you won’t be able to make any changes. If your uncle was the donor and he passed away, the trust is most likely now irrevocable.

In addition, you should review the boilerplate language, as well as the tax provisions.

Talk to an estate planning attorney about any questions you may have and to help you interpret the trust terms.

Reference: Forbes (June 17, 2019) “A Beginner’s Guide To Reading A Trust”

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