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Estate Planning, Special Needs Trusts a.k.a. Supplemental Care Trusts

and Making Decisions for Loved Ones

Victoria Z. Sulerzyski, Esquire100 Light Street

Baltimore, MD 21202410.347.7304 | vzsulerzyski@ober.com

www.ober.com

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ESTATE PLANNING

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What is an Estate?

• Bank accounts• Broker accounts• Personal residence• Vacation home• Automobiles• Personal belongings

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What Else is an Estate?

• Mortgages and notes receivable• Insurance on the decedent’s life, in certain

circumstances• IRAs, company retirement accounts and

annuities• Powers of appointment, if held on date of

death• Transfers during decedent’s life

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Probate

• Process of changing title to property• Assets subject to probate include all the

decedent’s assets except those passing by operation of law or via beneficiary designation

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Non-Probate Property

• Annuities with beneficiary designation• IRAs and retirement plan accounts with

beneficiary designation• Assets in trust• Jointly titled property with right of

survivorship

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Probate Basics

• Appointment of a Personal Representative• Identification and collection of decedent’s

assets• Payment of decedent’s debt and

administration• Distribution of assets to heirs in accordance

with will or with state direction for decedent without a will

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Probate Disadvantages

• Public exposure to asset holdings• Court process• Legal and accounting fees for court

accountings and other legal filings• Can cause disagreements among family

members• Title transfers –wrong results

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What is Estate Planning?

• A good estate plan will --

• Control my property while I am alive and able

• Take care of myself and my loved ones if I become disabled,

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What is Estate Planning?

• And Then – After My Death…

• Gives what I have• To whom I want,• The way I want, and• When I want,• While saving every tax dollar, professional

fee and court cost possible!

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The Estate Planning Toolbox

• Durable Power of Attorney• Wills

• Different types

• Trusts• Revocable• Irrevocable• Charitable• Special Needs

• Health Care Documents• Living Will• HIPAA Release• HCPOA

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Durable Power of Attorney

• Allows others to manage your assets or financial affairs

• Durable = even if you are incapacitated

• Power terminates on your death

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What Does a Will Do? And Do I Need One?

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• A Will:

• At a minimum, everyone needs one,– even if they also have a trust

• Effective only upon death• Must go through probate• Does not provide for disability or incapacity• Public Document

Last Will & Testament

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• Simple Wills• Wills and Springing Trusts• Pour over Wills

• At death, your will goes through probate before your assets are distributed

What is a Revocable Living Trust?

• Created by a document signed by YOU

• Contains your instructions for your assets at your death

• The trustee you choose can manage your assets if you become incapacitated

• Assets titled in the name of the trust do not go through probate

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How Does a Revocable Living Trust Work?

• You transfer your assets from your name to the name of your trust

• You keep control of the assets• You can buy/sell them as before

• No separate tax return for trust• You can change or cancel your trust

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Example

• Bob and Sue Smith, as Tenants by Entireties, would change to:

• Bob and Sue Smith, trustees under the Trust dated January 1, 2012.

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Bob and Sue Smith Bob and Sue Smith,trustees under trustdated January 1, 2012

With a Revocable Living Trust

• You maintain control• Privacy• Disability – Incapacity planning• Estate taxes may be reduced in certain

cases• Avoids some/most probate fees

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What Else Do I Need?

• Health Care Documents:• Living Will• Health Care Power of Attorney• HIPAA Release

• Why do you want to worry about these?

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Maryland Inheritance Tax

• For persons that pass on after 7/1/2000:• 10 percent on property passing to certain

individuals.

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SPECIAL NEEDS TRUSTS A.K.A. SUPPLEMENTAL CARE TRUSTS

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Special Needs Trust ("SNT") Planning is a Part of Estate Planning

• For Multiple Generations

• For Multiple Branches of a Family

• For Different Types of Disabilities

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What is a Trust?

• All Trusts have three (3) parties:• Grantor: Person making the Gift to the

Trust• Trustee: Person managing the Gift(s) in

the Trust• Beneficiary: Person receiving the benefits

from the Trust

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The Need for Special Needs Trusts

• Special Needs Population is Growing• More "conditions" considered disabled• Advances in medical treatment

• Financial Pressures on SSI, Medicaid and Medicare

• Aging population, increasing health care costs• Anticipate reduction or limitations on benefits

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Special Needs Trusts

• Intent:

• To SUPPLEMENT the benefits provided to a beneficiary by any government program. NOT to supplant the government benefits.

• Improve the quality of the beneficiary’s life!

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Examples of How an SNT is Used…

• For therapy not covered by Medicaid or SSI• For vehicle purchase or modification to

accommodate a disability• Recreational activities and equipment• Travel• Quality of Life Trusts

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Self-Settled SNTs

• D(4)(a) Trusts:

• Funded by Beneficiary Assets

• Often from lawsuit award

•Payback Provision

• Highly regulated – many rules to comply

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Pooled SNTs – D(4)(c)

• Self-Settled SNT – from beneficiary’s funds

• Managed by Non-Profit, in a Separate Account for Beneficiary

• Any remainder can stay in Non-Profit, instead of being used to pay back the State

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Third Party SNTs

• Family Created SNTs• Funded by Parent, Grandparent, Guardian

• Created during lifetime• Created at death through Will or Living Trust• Can be funded by life insurance• Cannot use the disabled individual’s assets

•No Payback Provision

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Forms of Third Party SNTs

• State Approved• Maryland Discretionary Trust Act• Limits on what types of benefits can be paid

• Common Law• Private, Discretionary Trust• Only limitation is to ensure that benefits paid do

not disqualify federal or state benefits

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SNT Issues & Concerns: II

• Need sophisticated Trustees that understand federal and state programs for disabled children and adults

• Need sophisticated Trustees that understand investing – all Trustees have fiduciary duty of care to the beneficiary

• For Self-Settled SNTs, Trustee must be diligent about expenditures and paybacks

• SNTs do not allow a parent to forego support obligations (for a minor)

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Types of Government Programsfor Disabled Children

• Model Waiver for Medically Fragile Children:• Child Needs Hospital or Nursing Facility Level of

Care• Must be Chronically Ill or Severely Impaired Child

Requiring 24-hour Inpatient Care, but Without Home Care Services, Child will Require Hospital, Nursing Facility

• Parent’s Income and Assets are Waived for Eligibility

• Maximum Amount of Children Permitted on Waiver = 200

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Government Programs (Continued)

• Medical Assistance for Families:• Eligibility Income Limitations • Provides Child with Services Such as Low Cost or

Free Prescriptions, Doctor Visits, Emergency Room Visits, Hospital Stays or X-RAY and Lab Services

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Government Programs (Continued)

• Autism Waiver• Serves Children with Autism Who Have IFSP and/or

IEP• Child Must Meet Institutional Level of Care and Be

Served in Community Through Waiver Programs• Services to Support Child in Community include

Respite Care, Family Training, Service Coordination, Intensive Individual Support Services

• Eligibility Based on Child’s Income; Not Parents• Child Must Meet Autism Waiver Medical and

Technical Criteria• Current Wait List

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Government Programs (Continued)

• SSI – Social Security Income• Income and Asset Limitations – Family and Child –

Less Than $2,000 Asset Limitation

• Child Must Have Physical and/or Mental Condition that Results in "Marked and Severe Functional Limitations"

• Condition must have Lasted or be Expected to Last at least 12 Months or Must be Expected to Result in Death

• When Child Turns 18 – May Qualify for SSI Based on Child’s Income and Assets

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Government Programs (Continued)

• SSDI – Social Security Disability Income• Available to a Disabled Adult Child who has a

Disability that Began Prior to Child Attaining Age 22

• Parents Must Be Receiving Social Security Retirement of Disability Benefits or Must Have Died Eligible for Social Security Benefits

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MAKING DECISIONS FORLOVED ONES

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Making Decisions for Loved Adults

• Surrogate Decision – Making if no Advance Directive in Place• Guardian, if one has been appointed• Spouse• Adult Child• Parent• Adult Sibling• Friend or Relative• Requires Two Physician Certificates

• Guardian of the Person• Guardian of the Property

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Questions

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