Improving the Supplemental or Special Needs Trust

In December 2016, shortly before leaving office, President Obama signed into law the Special Needs Trust Fairness Act, which amended the Social Security Act in a way that is very important to people living with disabilities.

Disabled individuals are often recipients of government benefits that can make the difference in allowing the individual to lead a fuller, more independent life. However, most benefits like these are “needs-based” or “means-tested.” In other words, an award from a lawsuit or a small inheritance could result in the loss of these benefits. Since 1993, the Social Security Act has allowed such funds to be placed into a Supplemental (or Special) Needs Trust (SNT) and then spent on behalf of the individual with disabilities in order to enhance their care by supplementing (but not supplanting) the government benefits.

However, the statute that originally authorized SNTs also required that the trust had to be established by “a parent, grandparent, legal guardian of the individual, or a court,” forcing disabled individuals to rely on people other than themselves, when that might not otherwise be necessary. The two word change that was signed into law in December adds “the individual” to the list of people who are able to create an SNT. The result is that clients, when they are otherwise competent, are now explicitly allowed to create these trusts on their own behalf, without having to involve parents or other family members.

If you are in need of legal advice regarding Supplementary or Special Needs Trusts or another type of trust, Gove Law Office is here to answer your questions. We handle a wide variety of legal needs, including estate planning and administration. For further information, please contact Attorney Michael Gove at mgove@govelawoffice.com or 413-583-5196.

Trusts: More Uses Than You Might Think

Often times, when meeting with clients, I bring up the topic of a trust. Most people immediately dismiss the idea, claiming they’re not worth millions of dollars and don’t need a trust. They’re right — one reason to establish a trust is to help protect large amounts of wealth from high estate tax penalties. But there are four other common reasons to consider a trust, and they don’t depend on you being a multi-millionaire:

  1. Control Assets After Your Death
  2. One of the most common reasons clients use a trust is to have a mechanism in place where they can control the distribution and use of assets after their death. Parents with young children don’t always have a lot of cash assets on hand but they may own property and likely have life insurance, which means if they were to die, there would be significant assets in their estate. If both parents were to pass away, however, their children would become eligible to receive those assets when they turned twenty-one. Instead, by creating a trust, you (or other relatives) can control those assets, and direct the assets be held for the benefit of your children, but not distributed until your children are older, or have reached a specific point in their lives (graduating college, or getting married, for example).

  3. Hold and Share Control of Real Estate or Business Interests
  4. Real property or business assets can be placed into a trust for the purpose of sharing control of the asset between the trustees, or sharing the distribution of the value of the asset between the beneficiaries. Instead of transferring the asset directly to individuals, you can use the trust to make sure the asset will eventually be transferred, but will remain cared for and under a level of control for as long as the trust exists.

  5. Protect Assets Prior to Applying for Medicare Assistance
  6. To be approved for nursing home care through Medicare, you cannot have any significant assets in your own name. The government, however, looks to see if the applicant has gifted away assets any time over the last five years (this is referred to as the “five year look back period”). It’s important to consider moving assets out of your name earlier so you can avoid the five year look back period, but transferring your house or cash assets directly to your children can be filled with risks. One way to minimize those risks is to transfer assets into an irrevocable trust, which moves them out of your name without granting full ownership in any individual.

  7. Provide for the Care and Protection of Your Pets
  8. Recent changes in Massachusetts law allow you to leave money in trust for your pets. These Pet Trusts can provide guidance about the level of care the pet should receive, and leave room to name both a caretaker for the pet and someone to ensure the trust is being enforced. (For more information, see our earlier post about Pet Trusts.)

If you have questions about trusts, or any estate planning issues, contact us at mgove@govelawoffice.com or 413-570-3170.

Use Supplemental Needs Trusts to Ensure Benefits Are Not Lost

When someone suffers from a physical or mental disability, they may be eligible for state and federal benefits. Many benefit programs, however, are “need based,” which means the individual is prohibited from having too much income or too many assets. The asset limitations can often be as low as $2,000, which means that even the smallest, well-meaning gifts or bequests from family members to the disabled individual can have dire consequences for that individual’s care.

To avoid an inadvertent disqualification, any gifts or bequests to the disabled individual should be made to a Supplemental Needs Trust (SNT) which names the disabled individual as the beneficiary, but allows an independent trustee to determine exactly how and when money is spent on the beneficiary’s behalf. The funds and assets in the SNT can be used to pay for additional services or care which are not covered by the benefit programs. These services and care can include:

• Transportation
• Training and rehabilitation programs
• Specialized equipment
• Medical expenses
• Entertainment
• Home health aide expenses
• Items and possessions to enhance quality of life.

An SNT can hold most types of assets, and can even be the beneficiary of a life insurance policy. The most important thing to remember, however, is that an SNT should be drafted in advance to ensure it accomplishes the desires of the person funding the trust and meets the needs of the disabled beneficiary.

If you have any questions about Supplemental Needs Trusts, would like to gift money to someone with a disability, or would like to discuss other estate planning questions, contact us at mgove@govelawoffice.com or 413-570-3170.

Taking Care of Your Smallest “Children”

For many of us (myself included), pets play an important role in our lives. Whether dogs, cats, birds, small mammals, reptiles, or other animals, they become part of your family and, in exchange for providing comfort and love, they ask only for shelter, food, and the occasional belly rub. But what will happen to your pets if you’re no longer available to take care of them? In Massachusetts, under G.L. c. 203E, § 408, you can create a Trust for Care of an Animal (a “Pet Trust”) to provide for your pet’s needs when you’re not able to.

To ensure that your pet receives the care they deserve, and that trust funds are being used for that purpose and are not expended frivolously, a Pet Trust should identify people to serve in at least three roles. The first role is the trustee. The trustee is the person in charge of maintaining and investing the funds held by the trust, providing an accounting of the funds when requested, and disbursing the funds for the care of your pet when needed.

The second role is a caretaker. The caretaker is the person who will actually house, feed, or care for your pet, and will make requests to the trustee for the costs of this care. This person should be someone who cares about animals, has a close tie to you or your pet, and who would have the ability and time to care for your pet.

The third role is the trust enforcer. The enforcer is the person who will act on your pet’s behalf, and who can force the trustee to take action or to disburse funds for the care of your pet. (The caretaker can also force the trustee to take action, but having separate people fill these roles will help ensure the requests for funds are both reasonable and balance the immediate needs of the pet against the desire to maintain trust principal for the pet in the future.)

You can provide additional guidance within the Pet Trust to describe the care your pets should receive, to address different situations that might arise, and to name one or more people that the trustee, caretaker, and enforcer could refer to when big decisions need to be made. A Pet Trust will continue to exist until the death of your last pet. If necessary, the probate court can name the trustee or enforcer, and an application to do so can be made by any interested individual or charitable organization, but naming these individuals (along with alternates) in your trust document will allow you to choose the right people to fill those roles, and will give you security that your pets will be well cared for no matter what.

If you have any questions about the creation of pet trusts, or any other estate planning issues, contact me at mgove@govelawoffice.com or 413-570-3170.