Estate Planning and
Special Needs Trusts
Presented by:
Joshua L. Brothers
Barbara Byram
William L.E. Dussault
www.dussaultlaw.com
Public Benefits Review
SSI/Medicaid
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Disabled, blind, >65
Disabled = no SGA
($1,000.00/month)
“Means tested”
– Income
– Earned ($2:$1)
– Unearned ($1:$1)
– ISM (up to 1/3)
– Assets < $2000
(individual)
– Exemptions
include primary
home (<$500k),
vehicle, personal
property, SNT
SSDI/Medicare
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Disabled, blind, >65
Disabled = no SGA
($980/month)
“Entitlement program”
– Available to
individuals who have
paid FICA taxes in the
last 20 of 40 quarters
prior to disability
– Not “means tested”
Medicare available when:
over 65 or meets SSA
disability definition, 29
months post injury
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Last Will and Testament (aka the “Will”)
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Most common estate planning document
Controls distribution of “probate” assets at death
Washington’s probate process
Federal Estate tax considerations ($3,500,000 in 2009; none in 2010,
$1,000,000 in 2011)
– Living trusts and estate taxes
– $2,000,000 WA State Estate tax
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Should I leave assets to an individual with disabilities?
– Outright distribution
– Disinherit the individual
– “Testamentary” special needs trust
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Roles of Individuals in a Will
• Executor:
– Duties
– Who to name?
• Guardian:
– Duties
– Who to name?
– Should be consistent with any Court files
• Trustee:
– Duties
– Who to name?
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Probate vs. Non-Probate Assets
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Probate assets are assets held in the decedent’s name without a beneficiary
designation that pass in accordance with the decedent’s will.
Non-probate assets are those that pass by a written instrument or arrangement
other than a will
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Jointly owned property with right of survivorship (bank accounts and real property)
Pay on Death (POD) Account
Trust
Community Property
Individual Retirement Accounts (IRA)
401(k) Plans
Life Insurance
Review non-probate assets on a regular basis
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What is a Trust?
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Separate legal entity
Barrier between beneficiary and Trust assets
Roles
– Trustor or Settlor
– Trustee
– Beneficiary
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Basic Functions of a Trust
– Safeguard assets
– Financial Management
– Distributions
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“Types” of Trusts are just restrictions on basic functions
Can serve as an alternative to guardianship
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What is a Special Needs Trust (SNT)?
• Purposes:
– Financial management
– Continued eligibility for “means” sensitive benefits (primarily SSI and Medicaid)
• Restriction on expenditures – “extra and supplemental needs” of the
beneficiary
– Needs not covered by SSI and Medicaid
– Cannot pay for basic food (groceries) and shelter (rent and basic utilities) or primary
medical services otherwise covered by benefits
– Can be used to pay for vacations, clothes, entertainment, education, etc.
– Trust restrictions must be observed.
• Must be “irrevocable”
• Sole benefit
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Source of Funding Matters
• 2 sources of funding:
– Assets of anyone but the beneficiary (3rd Party SNT)
– The beneficiary’s assets (Self-Settled SNT or (d)(4)(A) SNT)
• Source determines who can establish the SNT and the terms of
the SNT
• Self-settled are any assets which the beneficiary or his/her
guardianship is entitled to receive
– Outright inheritances or gifts
– Settlements/judgments
– Social Security back payments
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Self-Settled (d)(4)(A) SNT
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Beneficiary’s own assets
Restrictions
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Beneficiary must be disabled
Established by parents, grandparents, guardian, or court
Beneficiary must be under 65 years of age
Medicaid Reimbursement
“Grantor” Trust if drafted appropriately
Alternative: (d)(4)(C) SNT
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Pooled Trust
Retained Trust assets replaces Medicaid Reimbursement
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Third Party SNT
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Assets of anyone other than the beneficiary
No (d)(4)(A) SNT restrictions
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Complex Trusts
Can be a Living or Testamentary Trust
Common situations in which a Third Party SNT is created
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Control of assets after the beneficiary has passed away
– Anyone can establish
– Beneficiary can be any age
– No Medicaid reimbursement
– Will and Estate Planning documents
– Family or friends want to assist the beneficiary
– Avoidance of multiple SNTs in wills
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Developmental Disabilities Life
Opportunities Trust (DDLOT)
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Also known as the Endowment Trust
State-run Trust that is administered by the Arc
Available only to individuals who are developmentally disabled as
determined by DDD
Can be self-settled or third party
Administrative Fees & Costs
– $600 enrollment fee
– Tax return preparation and filing fee
– Annual management fees for day-to-day management (greater of $75 or 2% of
account balance with $750 cap)
– Investment Board Fees (investment fees)
– Trust Manager Fees (the Arc)
– State Treasurer Fees
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DDLOT Matching Funds
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Administrative fees currently being matched
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Administrative fees previously matched, but now on hold
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Requires the accumulation of $25 per month for 3 consecutive years ($900 over three years)
Can be periodic payments or a lump sum
Can only spend “matched funds” after being vested
Matching funds are not guaranteed and have run out
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25% state match of up to $31,000 ($7,750)
Contributions cannot be withdrawn in the same year they are deposited
Only $3,100 will be matched in a single year
Vesting
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Annual management fee
Match of Contributions (on hold!)
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Tax prep/filing fees
$600 enrollment fee
2010 Legislative Session
Foundation
Proportionate Distributions
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DDLOT Investment Strategy
• Conservative Investment Strategy
– 23% in fixed income (bond market fund)
– 24% in cash equivalents (short-term investment or
money market funds)
– 14% in US Equities
– 39% in Treasury Inflation Protection Securities (US
inflation indexed bonds)
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DDLOT Advantages & Disadvantages
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Advantages
Potential for matching funds
Professional management if no
family to assist
No on-going attorney’s fees and
costs for court reporting
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Disadvantages
Loss of control
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Timely distributions
Rejection of distribution requests
Investments
Immediate availability of funds
Terms of Trust (trustee, etc.)
Property
Conservative investments
Potential administrative fees and
costs – about to find out!
Risk Aversion?
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Disclaimer & Notice
• This training and written materials are designed to provide accurate
and authoritative information in regard to the subject matter
covered. It is provided with the understanding that the presenters
are not engaged in rendering legal, financial or other professional
services. If legal advice or other expert assistance is required, the
services of a competent professional should be sought.
• Please keep in mind all written materials and power point slides are
the intellectual property of the Dussault Law Group. These
materials may not be distributed without the express written
consent of the authors.
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Thank You!
Joshua L. Brothers
Barbara Byram
William L.E. Dussault
www.dussaultlaw.com