Transcript Long-term Care Planning

LTC Planning for Families
with Children with Special
Needs
April 29, 2008
Harry S. Margolis, Esq.
Margolis & Bloom
Boston & Framingham
Academy of Special Needs
Planners
Some Statistics

37 million Americans have disabilities




5 million under age 18
32 million over age 18
7 million over age 65
This means that there are
approximately 30 million families with
individuals with disabilities under age
65 who need planning
Some More Statistics



6 of over 1,000 children has autism
according to the National Institute of
Mental Health – huge growth in rate
1 in every 800 children is born with
Down’s syndrome
Their life expectancy has doubled in
last 15 years from 25 to 49 years
Special Needs Planning: A
Terrific Practice Area



Collaborative: attorneys and financial
planners must work together
Providing real value to clients
Growth area
Common Concerns of Parents of
Children With Special Needs





How can I protect my child’s future?
Can I be sure she has an advocate when I
am no longer around?
Can I leave my child sufficient funds and still
be fair to my other children?
Is there any way to preserve the funds my
child receives from a PI settlement?
Who should manage the funds?
Preserving Public Benefits





Social Security Disability Income
(SSDI)
Supplemental Security Income (SSI)
Medicaid
Medicare
Public Housing
Special Needs Trusts




Supplemental or Special Needs Trust
(d)(4)(A) or “Payback” Trust
(d)(4)(C) or Pooled Trust
Pooled Third-Party Trust
Supplemental or Special
Needs Trusts



Third-party
Revocable or irrevocable
Discretionary
(d)(4)(A) or Payback Trusts





42 USC § 1396p(d)(4)(A)
Under 65 and disabled when funded
Created by parent, grandparent, court
or guardian
One beneficiary
Must payback the state (or states) for
Medicaid paid upon beneficiary’s death
(d)(4)(C) or Pooled Trusts






42 USC § 1396p(d)(4)(C)
Managed by non-profit organization
No age 65 limit
But consider transfer rules
Created by parent, grandparent, court,
guardian or individual
Payback requirement, except for funds
retained in trust
Third-Party Pooled Trusts





Generally run by non-profit
Funded by anyone but the beneficiary
No age limit
No payback requirement, though nonprofit may require a share of remaining
funds
Great solution when no trustee
available
Directory of Pooled Trusts

http://www.specialneedsanswers.com/resources/dire
ctory_of_pooled_trusts.asp
Drafting Considerations









Self-Settled vs.Third-Party Trusts
Discretionary vs. restrictive
SSI issues
Statement of grantor’s intent
Other beneficiaries?
Escape clause?
Remainder beneficiaries
Care committee
Trust protector
Self-Settled vs.Third-Party Trusts



Whose money is it?
Don’t use a (d)(4)(A) trust if it’s not the
beneficiary’s money
But what about Crummey powers?
Discretionary vs. restrictive


Provide for full discretion
Concerns



Run away trustee
Predatory states
Guidance


In trust
In memorandum of intent
SSI issues


Loss of $1 of benefits for every $1
distributed to beneficiary (over $20 a
month)
In-kind income




Housing
Food
One-third rule
Medicaid benefit tied to SSI
Statement of grantor’s intent


Separate section from distribution
powers
Precatory
Other beneficiaries?


Not in (d)(4)(A) or (C) trusts
Okay in third-party trusts
Escape clause?





What happens if trust doesn’t work?
Or becomes economic?
If including, make discretionary
Permit funding other trust for
beneficiary
Example of money going to sister of
beneficiary (who she hates)
Remainder Beneficiaries



Remember, even disabled child may
someday get married and have
children
In large cases, consider estate tax
issues
Consider including testamentary power
of appointment for beneficiary
Care Committee






Family and professionals
To advise trustee
Provide for compensation to professionals
Mechanism for replacing members
Don’t require trustee to follow care
committee instructions
Provide clarity on when trustee must consult
committee
Trust Protector





Power to replace trustee
Power to review accounts
Power to amend trust?
Limited to maintaining eligibility for
public benefits?
Fiduciary responsibilities?
Revocable or irrevocable


Revocable to permit changes down the
road
Irrevocable



To hold life insurance
If others might contribute to trust
To protect in case donor needs long-term
care or has credit issues
Choice of Trustee




Biggest issue
Often no reliable trustee available
Use professional trustee
Here’s why
Just say “no”




Budgeting
Needs of family members
Case of dad’s need for a loan
Case of the bad voodoo
Just say “yes”



Understanding the rules may mean
giving up SSI coverage and relying on
the trust
Budgeting carefully can permit
payment for extras
The trip to Disneyworld
Letter or memorandum of
intent


Can simply be wishes for the beneficiary
expressed to the trustee
Or a more comprehensive map to the
beneficiary’s life, including:





All contacts
Prescriptions
Housing arrangements
Likes and dislikes, from food, to music, to travel
Etc.
Make sure there’s enough money to
meet the beneficiary’s needs

Estimate annual costs





Figure in cost of replacing parents
Benefits available
Multiply by 20
If estate is insufficient, supplement
with life insurance
LTCI
Be fair to the other children




Don’t disinherit other children to
provide for child with disability
Could provide disproportionate share
to child with special needs
Or fund extra share with life insurance
LTCI
Jim and Sarah Jefferson





Two children, daughter healthy, son
mentally ill
Jim and Sarah are in their early 60s and
approaching retirement
Son lives in halfway house with some
assistance
Son does not work, but has in the past
Son receives SSDI ($400/month), SSI
($250/month) and Section 8
Their Plan





SNT for son
Question of who should be trustee:
daughter, other family member,
professional trustee?
Question of how to fund trust: Life
insurance?
LTCI
Standby (d)(4)(A) trust
Gary Judson





45 years old
Disabled in car accident
Receives SSDI, Medicare and
MassHealth
Settling lawsuit for $1 million after
attorney’s fees and expenses
PI attorney concerned about Gary
preserving public benefits, quickly
spending money
Solutions





Structured settlement
Trust
Professional trustee
(d)(4)(A) trust
Spending plan (3% rule)
Learning more
Academy of Special Needs Planners
 More than 200 qualified attorneys nationwide
 www.specialneedsanswers.com
 866-267-0967
Contact Information
Harry S. Margolis
Margolis & Bloom
Boston and Framingham
617/267-9700
[email protected]