Supplemental Needs Trusts

1
Supplemental Needs Trusts

• Presented by
• Larry R. Rivkin
• on behalf of CVLS
• May 20, 2008

2
Public Benefit Programs
Non-MeansTested MeansTested
Income SSDI SSI
Medical Medicare Medicaid
3
Exempt Assets

• 2,000
• Homestead property
• Personal effects and household goods
• Motor vehicle
• Life insurance (with restrictions)
• Burial funds and burial space
• Self-support resources

4
Historical Choices

• Lose benefits
• Disinherit child

5
Trust Solution for Third-Party Funds

• 760 ILCS 5/15.1 (Sept. 1991)
• Authorizes SNTs for funds outside disabled
  persons control
• Trust assets exempt
• No government reimbursement at death
• Created by anyone except the disabled person

6
Trust Solution for Disabled Persons Funds

• OBRA Payback Trust (d-4-A Trust) (Aug. 1993)
• Authorizes SNTs for funds in control ofdisabled
  person under 65
• Created by parent, grandparent, legal
  guardian,or court
• Trust assets exempt during life
• Government reimbursement at death

7
Alternative to Free-standing Trust

• Pooled Trust (d-4-C Trust) (Aug. 1993)
• Funds pooled for management purposes under common
  trust agreement with joinder
• No age requirement
• Created by disabled person, parent, grandparent,
  legal guardian, or court
• Trust assets exempt during life
• Government reimbursement at death
• Factors to consider
• Account minimums
• Trustee of pooled trust may retain investment
  control
• Some pooled trusts dictate disposition of assets
  after disabled persons death and government
  reimbursement
• Fees

8
Examples of IL Pooled Trusts(see handout)

• Illinois Disability Pooled Trust
• Options for Living
• Lifes Plan

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Primary Terms ofSupplemental Needs Trust

• Make trust irrevocable but give limited power to
  amend to comply with law
• Express grantors intent
• Limit distributions
• For supplemental needs only
• In trustees sole discretion (no standards)
• To providers of goods and services - not to
  disabled person

(Continued )
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Primary Terms ofSupplemental Needs Trust (contd)

• Avoid distributions for food or shelter until all
  benefits are exhausted (will reduce SSI)
• Name trustees and successor trustees
• Remainder beneficiaries at death (after Medicaid
  reimbursement for d-4-A trust)
• Parents can be trustees and remainder
  beneficiaries if they have no estate tax exposure
  and if they are not trying to qualify for public
  benefits themselves

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Timing of Trust Creation and Funding

• When to create SNT?
• As soon as present or future need is anticipated
• When to fund SNT?
• 15.1 usually at death of parent, grandparent,
  or other family member or close friend
• d-4-A
• Prior to disabled persons application for SSI or
  Medicaid if disabled person has over 2,000 of
  assets without spend down opportunities
• Thereafter if disabled person receives assets
• How much to fund SNT???

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Coordination with Other Estate Planning Documents

• Critical to update
• Wills of parents, grandparents, etc.
• Insurance and retirement plan beneficiary
  designations
• So that no assets pass directly to disabled
  child all assets for disabled child should be
  allocated to SNT

13
Common Drafting Issues

• Stand-alone SNTs preferred to embedding SNT in a
  will or revocable living trust
• Disabled person should not
• Be a beneficiary of a one-pot trust (such as a
  family trust) that has multiple beneficiaries
• Have withdrawal rights over an ILIT
• Termination recommend avoiding kick-out
  provision
• Provisions when grantor might also qualify for
  Medicaid or SSI

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Government Resources

• Social Security Administration Administers SSI
  Program (www.ssa.gov)
• Department of Healthcare and Family Services
  Administers Medicaid Program in IL
  (www.hfs.illinois.gov)

15
Local Private Resources

• Protected Tomorrows (www.protectedtomorrows.com)
• Life care planning , service coordination, and
  advocacy
• SSI and Medicaid eligibility planning
• Family Benefit Solutions (www.familybenefitsolutio
  ns.com)
• SSI and Medicaid eligibility planning
• PACT, Inc. (www.pactinc.net)
• Life care planning, service coordination, and
  advocacy
• Trusteeship
• Life Care Innovations (www.lcius.com)
• Life care planning, service coordination, and
  advocacy

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Sample Family Situation

• Family Members
• Mom and dad
• Three children one with severe CP
• Grandparents
• Assets
• Equity in home
• 401(k)s
• Life insurance
• Child with CP has own assets from gift or
  settlement

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Conclusion

• Be conservative!
• Review sample forms
• Questions