185 milwaukee ave., suite 235, lincolnshire, illinois 60069 phone (847) 793-2484 fax (847) 793-2485...
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185 MILWAUKEE AVE., SUITE 235, LINCOLNSHIRE, ILLINOIS 60069PHONE (847) 793-2484 • FAX (847) 793-2485 • EMAIL [email protected] • WEB
www.rivkinlaw.com
Supplemental Needs Trusts
Presented byLarry R. Rivkin
on behalf of CVLSMay 20, 2008
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Public Benefit Programs
Non-MeansTested
MeansTested
Income SSDI SSI
Medical
Medicare Medicaid
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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
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Lose benefits
Disinherit child
Historical Choices
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Trust Solution for Third-Party Funds
760 ILCS 5/15.1 (Sept. 1991) Authorizes SNTs for funds outside
disabled person’s control Trust assets exempt No government reimbursement at
death Created by anyone except the disabled
person
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Trust Solution for Disabled Person’s Funds
OBRA Payback Trust (d-4-A Trust) (Aug. 1993) Authorizes SNTs for funds in control of
disabled person under 65 Created by parent, grandparent, legal
guardian,or court
Trust assets exempt during life Government reimbursement at death
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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
person’s death and government reimbursement Fees
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Examples of IL Pooled Trusts(see handout) Illinois Disability Pooled Trust Options for Living Life’s Plan
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Primary Terms ofSupplemental Needs Trust Make trust irrevocable but give
limited power to amend to comply with law
Express grantor’s intent Limit distributions
For “supplemental needs” only In trustee’s sole discretion (no
standards) To providers of goods and services - not
to disabled person(Continued … )
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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
Primary Terms ofSupplemental Needs Trust (cont’d)
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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 person’s 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
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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)
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Local Private Resources Protected Tomorrows (
www.protectedtomorrows.com) Life care planning , service coordination, and advocacy SSI and Medicaid eligibility planning
Family Benefit Solutions (www.familybenefitsolutions.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