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Page 1: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Hosted by the Kentucky Autism

Training Center:

An Overview of

Special Needs Trusts

Richard N. Bush,

Attorney at Law

March 22, 2011

Page 2: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Topic Areas

• Federal and Kentucky statutory

framework

• The “nuts and bolts” of an SNT

• Planning Considerations

• Additional Documents

• Summary

Page 3: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Federal and Kentucky Statutory

Framework

42 USC 1396 Subsection D (4)(A)

[exempts SNT assets as a Medicaid resource]

42 USC 1382c (a)(3) [defines disability]

POMS [Program Operations Manual]

Page 4: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Kentucky

907 KAR 1:650

[Treatment of trusts and Medicaid]

Kentucky Cabinet For Health and Family

services:

http://chfs.ky.gov/dms/incorporated.ht

m

Page 5: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

What are the requirements for

establishing an Special Needs Trust

(SNT)?

When is an SNT is appropriate?

Page 6: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

First Party versus Third Party

SNTs

Identical in operation

Medicaid Recovery

Source of funding

Sometimes both are needed

Page 7: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

B. The “Nuts and Bolts” of an

SNT

How does a SNT work in the real world?

Legal Document

Sole Benefit

Who can set up a SNT?

Page 8: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Typical SNT Provisions

Declaration of Trust; appointment of Trustee and Successor Trustee(s)

Definitions; Purpose and Intent

of Trust; Assets of the Trust

Amendments Medicaid reimbursement

Provisions tailored to beneficiary;

Spendthrift clause

Family/Home Living

Arrangements

Ultimate distributionPowers and duties of Trustee;

Removal of Trustee

Tax provisions; generation skippingAdvisory Committee/Trust

Protector

Misc; signatures and attachments

Page 9: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Planning Considerations

Who’s in charge?

Frequently parents or a sibling;

Parent issues, age, divorce, sibling rivalry

Sole Benefit Trust…Other siblings?

Page 10: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Planning Considerations

Medicaid Reimbursement

Financial Planning

Checks and balances

Planning for the next generation

Page 11: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Who should be the Trustee?

Consider…

• Fiduciary Responsibility

• Control within family

• Aging

• Co-trustees

• Distinguish: guardian and/or Social

Security Payee

Page 12: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Planning for the Next

Generation

The “pool” of future Trustees

Corporate Trustees

Page 13: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Checks and Balances

SNTs are Private documents

Potential for error

Advisory Committee

Trust Protector

Guardian/advocate

Page 14: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Financial Planning

Critically important topic!

Long term view

Financial Planner (vs CPA?)

Taxation of trust

Page 15: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Additional Documents

Last Will and Testament

Power of Attorney

Healthcare/Medical POA

Living Wills (Kentucky)

Living Trusts for Parents/siblings

Page 16: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Summary

Consequences of doing nothing

SNT “only game in town”

Unique to each individual and family

Page 17: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Summary

Plan “crystal ball gazing”

Get the best advice possible in all

areas:

living arrangements, financial, legal, and

others areas

Page 18: An Overview of Special Needs Trusts - louisville.edu · Training Center: An Overview of Special Needs Trusts Richard N. Bush, Attorney at Law ... of Trustee and Successor Trustee(s)

Questions?

Richard N. Bush

Attorney at Law

235 South Fifth Street

Fourth Floor

Louisville KY 40202

(502)584-7255

[email protected]