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CASE STUDY: THIRD-PARTY SPECIAL NEEDS TRUSTS PLANNING FOR FAMILY MEMBERS WITH DISABILITIES – Part 1
“Supplemental Needs Only” special needs trust. The trust would make sure that David would stay eligible for needed coverage, and still get the advantage of the inheritance from his mom. She named her daughter to be the Trustee with her son-in-law as the official backup or successor.
This is one in a series of articles about Elder Law by Michael H. Marks., Esq. Michael H. Marks is an elder law attorney practicing at Marks Elder Law with offices in Squirrel Hill and Monroeville. Send questions to michael@marks-law.com or visit www.marks-law.com. Minnie was a widow and had two adult children. Her son David had autism and some health problems. He lived alone in his own apartment and functioned independently, but worked only minimally and had a small income. His mother helped out with necessities and with extra cash and of course assisted and took care of him in many other ways. David had long been covered by Medicaid, a public healthcare benefit that paid for his very expensive prescription medications. Minnie wanted to provide for him securely after she was gone, but if she left an inheritance directly to David, he would become ineligible for Medicaid. Medicaid is for people who don’t have much income or assets. She could decide to leave David’s share of the inheritance to her daughter Sally instead, and she trusted Sally 1000%... But if something happened to Sally, she wasn’t as certain that she could rely informally on Sally’s husband to use the money for David (and she really didn’t trust her grandchildren to spend the money for their disabled uncle, either). The solution for taking care of David was to create the right kind of special needs trust planning. With our help Minnie wrote a Will that included a
When Minnie died the plan worked just as intended. David stayed eligible for health coverage to pay for his expensive prescription medications and Sally used his trust to buy him things that he needed, and that enriched his life. David got a much-needed new computer and TV, some furniture, new clothes to replace his old ones, and could still go out to a movie or a ballgame. Here’s how the trust works to keep David eligible for needed public benefits. First, the trust is a “discretionary” trust: distributions are entirely within the discretion of the Trustee. David has no right to make the trustee pay, and the trustee has no actual legal duty to support David. Second, the trust says that the money can only be spent in ways that will “supplement and add to, but never supplant or replace” other public benefits available for David’s basic need.
Sometimes, a family member is not a good choice as Trustee for a special needs trust. For a disabled person with greater needs, a professional trustee organization is often a better choice. Not only does a nonprofit
charitable trust or private trust company help by managing the money and fulfilling the complicated compliance and tax reporting, they often also have great expertise in helping people with disabilities. They know what services and benefits are available and can make sure the beneficiary gets everything they need, more so than a private individual can. In part two of this series and beyond, I’ll discuss First Party Trusts and additional strategies for disabled individuals. At Marks Elder Law, we help people every day with issues like these. I invite your questions and feedback. Please let me know how I can help you or your family.
With these provisions, the Medicaid authorities agreed that the money was not owned by David individually or under his control; that it was not intended for his basic maintenance and support; and that overall it was not so closely tied to David as to be an “available resource” for him. If it were considered “available,” he would be ineligible for Medicaid.
Name: JAA Width: 5.0415 in Depth: 6.75 in Color: Black Jewish Association on Aging gratefully acknowledges contributions from the following: File Name: A gift from ... In memory of... A gift from ... In memory of... Ad Number: 10043085 Anonymous ...................................................... Barney Dobkin Anonymous .......................................................Myra Freeman Anonymous ........................................................ Rae Solomon Anonymous ........................................................Ben Wanetick Morton S. Alman ............................................... Casper Alman Marlene Alpern ...................................................Sylvan Alpern Phyllis Pearl Astrov .............................................. Arnold Pearl Nancy Bowytz .................................................... Louis Bowytz Allan Cohen .................................................... Frank R. Phillips Beverly D. Gerber-Kalson .................................... Leon Kalson Lynne Gottesman..................................... Norman M. Wesoky Rae & Lou Gruenebaum ...............................Manuel Solomon Libby Israel ............................................... Jennie R. Jacobson Harvey Klein ...................................................Sidney Whitman Marcia Lieberman ......................................Leonard Silverblatt Mrs. Alvin Mundel ................................................. Milton Klein Joyce Offerman...............................................Irving Levenson
This kind of special needs trust is called a “Third Party Trust” because money for the trust came not from David himself, but from his mother, a third party. A “First Party Trust” is different: it’s created with the disabled person’s own money, such as from a settlement or an inheritance received directly. It’s rules are more stringent and less flexible. A Third-Party Trust like Minnie’s allows much more freedom in how the trust is created, who can administer it, and how the money can be spent.
Joyce Offerman.............................................Shirley Levenson George Pattak ..................................................... Aaron Pattak George Pattak ..................................................... Phillip Pattak Evelyn Rebb ................................................ Albert Kuperstock Ferne Rogow............................................ Rebecca Bluestone Barry Sadowsky ......................................Geraldine Sadowsky Goldie Samuels ..................................................Hannah Miller Goldie Samuels .................................................Scott Samuels Sally Santman .............................................. Simon Gastfriend Faye Pearl Schwartz ............................................ Arnold Pearl Karen K. Shapiro ............................................. Hyman Shapiro Don & Michele Soffer ...............Aunt Margaret (Margie) Levine Jerome Solomon................................................ Rae Solomon Freda Spiegel ........................................Sarah Perr Greenberg Mrs. Gail Stept ................................................Jacob Dickman Harold C. Weiss ................................................... Phillip Weiss
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