Recent Law Soon to Allow Disabled Persons to Create Their Own Special Needs Trust

 

What is a Special Needs Trust?

Disabled persons who receive means-tested public benefits like Supplemental Security Income (SSI) and Medicaid must have no more than $2000 in countable assets in order to qualify (among other requirements).  A Special Needs Trust is used to prevent disabled persons from being disqualified from receiving means-tested public benefits if they are to receive the benefits of trust assets or a personal injury award.  

 

Types of Special Needs Trusts

There are three types of Special Needs Trusts – first-party special needs trust, third-party special needs trust, and pooled trust special needs trust.  For this blog, we will only be discussing first-party and third-party special needs trusts. A pooled trust is a group trust that is administered by a nonprofit for many beneficiaries.

The main – and most important difference – between the two types of trusts is that a third-party special needs trust cannot hold funds belonging to the beneficiary (the person with special needs).  So, if a person (under 65) with special needs wins a personal injury award, or inherits money directly, and not thru a bequest directly to a third-party special needs trust, they will need to have a first-part special needs trust established.  Another key difference between a first-party and third-party special needs trust is that because a third-party special needs trust holds assets that never belonged to the beneficiary, the government is not entitled to reimbursement from trust assets after the beneficiary passes unlike a first-party special needs trust.  Thus, a third-party special needs trust can pass assets on to other family members after the beneficiary with special needs passes.  Also, a third-party special needs trust can be established for the benefit of a person with special needs by anybody other than the beneficiary.  A first-party special needs trust must be established by the person’s parent, grandparent, guardian, or the court – but keep reading below for recent changes to this law.

 

Recent changes to Special Needs Trust Law

As it stands this very minute, the law presumes that a person with disabilities lacks the capacity to establish their own first-party special needs trust, and therefore a parent, grandparent, guardian, or the court must establish it for him or her.  This is about to change.  In December of 2016 the house passed H.R. 34, which includes the Special Needs Trust Fairness Act and makes a simple modification to 42 U.S.C. 1396p(d)(4)(A).  The president has promised to sign this into law.  The significant change that this law brings about is that it allows a disabled person with mental capacity to establish his or her own first-party special needs trust.   

 

So, to summarize:

  • A Special Needs Trust is used to prevent disqualifying a person receiving Medicaid and/or Supplemental Security Income (SSI)
  • A first-party special needs trust holds assets that will belong to the beneficiary (such as a direct inheritance, or lawsuit award)
  • A third-party special needs trust holds assets that never belonged to the beneficiary (such as an inheritance that is being given to the special needs trust directly)
  • A first-party special needs trust can soon be established by a disabled person under 65 years old with mental capacity instead of needing a parent, grandparent, guardian, or courts intervention
  • A third-party special needs trust can be established by anybody except the person with special needs
  • The government can seek reimbursement from a first-party special needs trust after the beneficiary dies, whereas this does not happen with a third-party special needs trust

 

If you have any questions, or need to establish a Special Needs Trust, please call me today and let’s start planning.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and on my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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Tuesday, 07 June 2016 00:24

Long Term Care - Part Two

 

Long-Term Care Part 2

 

What Can I Do to Plan for Long-Term Care?

 There are a few options available in planning for long-term care.  Some of these options are:

  1. Private long-term care insurance
  2. “Self-Insurance” or paying out-of-pocket for expenses
  3. Life insurance to replace depleted assets used for funding long-term care
  4. Utilizing a Trust to provide some asset protection
  5. Use up all of your assets and live out your days in a nursing home

  

Some of the options are more desirable than others, and some may be out of reach for some people.

 

1. Private Long-Term Insurance

 Using insurance to pay for long-term care can be a great option if it is available to you.  First of all, you must be “insurable”.  This may vary from company to company.  Next the premiums must also be affordable.  Quotes for premiums are higher for older persons, and go up as you age.  Premiums for women are also usually higher than those for men.  I guess that’s the price of living a longer life!

Some questions and benefits that you should look for in long-term care insurance include (but aren’t limited to):

  • The ability to stop paying premiums while you are receiving benefits
  • Home care as well as nursing home care
  • Sufficient benefit payout to cover costs ($250 per day or more)
  • Duration of benefits (How long will the benefits be paid? 4 years? 5 years?)
  • When do benefits begin after it is established that care is needed
  • Is renewal guaranteed?

  

2. Self-Insurance

 Here, option 2 and 5 are pretty close to the same.  The real difference being how much income do you have and will it continue during your incapacity.  If it won’t continue, do you have sufficient net worth to provide your own long-term care and still provide all that you wish to your spouse, family, and loved ones?  Costs for long-term care obviously varies with the level of care required, and quality of life desired.  Do you want to live in an assisted living facility in La Jolla, your home, El Cajon (not that I have a problem with El Cajon!) or somewhere else?  If you can afford about $100,000 per year for long-term care, this may be a good option for you.  Also, you could use option 3 to replace or supplement consumed resources used for long-term care if you so desire.

  

3. Life Insurance to Replace Depleted Assets Used for Paying for Long-Term Care

 This option may be used in conjunction with any of the other options if you choose.  As long-term care costs arise, and as the bills are being paid, your assets are being depleted.  Life insurance can be employed to replace that value so that your spouse, family, and loved ones are still taken care of.  Should you not need to consume assets for long-term care, the life insurance and the assets will be there for your beneficiaries.

  

4. Utilizing Trusts for Long-Term Care

 The use of a Trust will be discussed in another blog. 

  

5. Use Up All of Your Assets and Live Out Your Days in A Nursing Home

 Again, like option 2, you are basically taking care of long-term care costs on your own.  If you have sufficient assets, then you have lived a blessed life.  If you do not have many assets and do no other planning, this will unfortunately be the default plan.  One hopes to never need long-term care, and I think most of us would prefer another option to this choice.  Choices are great, and we need to use them when we have the opportunity.

 

See lots of estate planning information on my website at: www.myestate-plan.com 

 

Please feel free to give me a call today and we can review your situation and other Estate Planning goals.  Everyone’s situation is different, and I can help create solutions. 

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Sunday, 05 June 2016 02:51

Long Term Care - Part 1

Long-Term Care Part 1

 

The 65-year-old and over segment of our population is growing, and growing faster than those under 65 years old.  From the year 2000 to 2050, those in the age group of 65 years of age and older will grow by 147%, while those younger than 65 will only grow by 49%.  Moreover, on average, 2 out of every 5 persons 65 years of age or older will need some type of long-term care.  If you don’t have the proper planning in place, the high cost of care can force you out of your own home and into a nursing home.  I think it is fair to say this is a result that none of us want.  Forty percent of us will need some type of long-term care, so all of us should plan.

 

 

What is Long-Term Care?

Long-term care is a variety of both medical and non-medical needs that are performed for us by another.  The needs could include help with cooking, eating, cleaning, dressing, bathing, mobility, or medical care provided by a skilled nurse.  This assistance may be provided either in your own home, or in an assisted living facility, or at a nursing home.     

  

What does Long-Term Care Cost?

 There is no simple answer other than to say it can cost a lot.  The cost will depend on the amount of care required.  Is it just help cleaning and cooking?  Or does the person require 24-hour care?  Towards the lower end, the cost can easily be several thousand dollars per month.  Health insurance and Medicare does not cover long-term care in your home, assisted living facility, or nursing home.

  

How Do I Plan for Long-Term Care?

 The good news is that there are a couple of options available to help us plan for long-term care.  Everyone’s situation is different, so I strongly suggest you consult an attorney to discuss options more fully.  Some options include:

  • Private long-term care insurance
  • “Self-Insurance” or paying out-of-pocket for expenses
  • Life insurance to replace depleted assets used for funding long-term care
  • Utilizing a Trust to provide some asset protection
  • Use up all of your assets and live out your days in a nursing home

 

As you can see, some of these options are more desirable than others, and some may be out of reach.  These and other options will be discussed in future blogs.  Thanks for reading.

 

Please feel free to give me a call today and we can review your situation and other Estate Planning goals.  Everyone’s situation is different, and I can help create solutions. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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