Special Needs Trusts:  Providing for Adult Children with Developmental Disabilities

Sarah Lepak

November 2004

 

 

INTRODUCTION:

 

            A special needs trust is an estate planning tool for parents who are concerned about the financial well-being of their disabled child after their deaths.[1]  Because some state and federal benefits for disabled individuals are needs-based, it is especially important to set up the special needs trust properly, with the advice of an attorney.  The largest needs-based government programs that provide benefits for disabled persons are Medicaid, which is a joint federal and state program, and Supplemental Security Income (SSI), which is administered by the Social Security Administration.[2]  Another consideration is cost-of-care liability, which involves state services that are free only to those who cannot afford to pay for them.[3]  In drafting the appropriate instruments, estate planners for families with a disabled child should take into account eligibility requirements for these needs-based programs, the family’s assets, and the tax implications of the plan.[4]  The estate plan should “ensure that: (1) the disabled individual will qualify for government benefits that are needed; (2) family resources supplement available benefits that may be needed, rather than supplant them; and (3) the rest of the family will be adequately protected.”[5] 

 

            Attorneys drafting special needs trusts should be aware of the potential criminal liability associated with assisting clients in disposing of assets to qualify for government benefits.  See section 4734 of the Balanced Budget Act of 1997 (42 U.S.C. § 1320a-7b(a)) and J. Mitchell Miller, J. Eagle Shutt & J. Matthew Miller, Medicaid and “The Granny’s Lawyer Goes to Jail” Law, Questioning the Criminalization of Attorney’s Advice, Criminal Justice Policy Review, March 2003, Vol. 14, No. 1, at 96-105. 

 

            To protect the disabled adult child’s eligibility for Medicaid and SSI benefits and to shield him/her from liability for cost-of-care, parents may create an inter vivos or testamentary discretionary special needs trust.[6]  The key is to make sure that the income and principal of the trust are not available under state law, which means that the disabled childe does not have a right to compel distributions from the trust.[7]  To do so, the language of the trust should give the trustee absolute and sole discretion over the amounts and purposes of distributions.[8]  Language in the trust that requires the trustee to provide for the health, support, and maintenance of the disabled child will give that child a right to compel distributions, which will jeopardize his/her Medicaid and SSI benefits and subject him/her to cost-of-care liability.[9]  If a dispute arises over whether a trust is a discretionary or support trust, most courts look to the language of the document to determine the settlor’s (parent’s) intent.[10]  Thus, it may be useful to include language in the trust instrument that makes clear the intent to establish a discretionary trust.[11]  In a minority of states, using discretionary language may not be enough.[12]  If that is the case, language that specifically prohibits the trustee from making distributions for basic support and medical care may be included.[13]  This should only be done if it is in line with the settlor’s intent.[14]  Such language does not guarantee protection of Medicaid and SSI benefits, but may provide additional evidence of the settlor’s intent to create a discretionary, rather than a support trust.

 

            If the special needs trust is inter vivos, contributions to the trust may subject the donor to federal gift tax.[15]  To avoid this, the trust could include a Crummey withdrawal right to qualify the contributions for the annual gift tax exclusion and thereby avoid gift tax liability for the donors.[16]  Crummey powers, which are closely scrutinized by the IRS, may not be illusory.[17]  Accordingly, the disabled child must be given notice of contributions and an opportunity to exercise the power.[18]  To ensure that this happens, it may be necessary to appoint a guardian.[19]  To keep the withdrawal right from being included in the disabled individual’s estate at his/her death (and subject to the federal estate tax) and to prevent gift tax liability upon the lapse of the right, the trust should also contain a 5 & 5 power.[20]  The drawback to this arrangement is that contributions may then interfere with the disabled individual’s eligibility for Medicaid and SSI because the right to withdrawal gives the individual a right to compel distribution.[21]  Whether it is more important to avoid gift tax liability or to protect the disabled child’s eligibility is a decision to be made on a case-by-case basis. 

 

            For federal estate tax purposes, every decedent is entitled to exclude a certain amount from his/her estate.[22]  The amount of tax that would have been paid on the excluded amount relieves tax liability in the form of a unified credit.[23]  For 2004 and 2005, the applicable exclusion amount is $1,500,000.[24]  In setting up a special needs trust for a disabled child, married parents should take into account the applicable exclusion amount.[25]  If their estates are small enough to completely avoid federal estate tax liability, it is probably preferable to have the surviving spouse’s will establish the special needs trust.[26]  This provides flexibility to the surviving spouse to change the provisions of the special needs trust during his/her life.[27]  If, however, the parents’ estates will be subject to the federal estate tax, the special needs trust should be created at the death of the first spouse and funded with assets equal to the applicable exclusion amount.[28]  The rest of that spouse’s estate should pass to the surviving spouse and be covered by the marital deduction.[29]  At the surviving spouse’s death, the applicable exclusion amount will be then available to shield amounts put into the special needs trust.[30]  This method ensures that both spouses’ estates will benefit from the unified credit.[31]  That spouse’s applicable exclusion amount an inter vivos trust may be a better option.[32]

 

            Federal income tax liability is another consideration in creating a special needs trust.[33]  If the special needs trust is a grantor trust under I.R.C. §§ 671-678, any income is taxed to the grantor as if the trust did not exist.[34]  In general, grantor trusts are those over which the grantor retains so much control, any trust income is essentially the grantor’s income.  For example, revocable trusts are grantor trusts.  For trusts other than grantor trusts, some trust income is taxed to the trust and some is passed through and taxed to the beneficiary (the disabled child).[35]  Whether it is preferable for the grantor, the trust, or the beneficiary to be subject to income tax liability depends on the applicable marginal tax rates and resource availability – another decision to be made on a case-by-case basis.

 

            In certain circumstances, creation of a special needs trust may also give rise to the federal generation-skipping transfer tax.[36]  For example, if a grandparent wants to transfer assets to a disabled grandchild.  The GST tax is beyond the scope of this pathfinder.  For more information, see Jennie Neumann, The Federal Generation-Skipping Transfer Tax, May 2004.

 

            In addition to financial provisions, the special needs trust may require the trustee or others to ensure that the disabled individual is receiving appropriate personal care and services.[37]  For example, the trustee may be required to make periodic evaluations of the child’s physical condition, education, work experience, social needs, residence, legal rights, and receipt of government benefits.[38] 

 

            Other useful provisions may include those related to distributions to the disabled child’s guardian, removal of the trustee, and accounting requirements.[39]  Further, the trust could contain a provision for termination of the trust in special circumstances and should contain a remainder provision specifying distribution upon the death of the disabled child.[40]

 

STATUTES and REGULATIONS:

 

Section 1614(a)(3) of the Social Security Act (42 U.S.C. § 1382c) – This section delineates the specific requirements for a person to be considered disabled under this Act.  The basic requirement is an inability to be gainfully employed due to physical or mental impairment.  The Commissioner of Social Security makes determinations regarding whether a person is considered to be disabled under this Act.

 

Section 1917(d) of the Social Security Act (42 U.S.C. § 1396p) – This section applies to self-settled trusts (i.e. those funded with the disabled individual’s own assets).  This is the section that establishes Omnibus Budget Reconciliation Act (OBRA) trusts, which are a form of special needs trusts.  To qualify, the trust must be established by a court or the disabled beneficiary’s parent, grandparent, or legal guardian.  The disabled individual must be the only beneficiary of the trust, must be under age 65, and must be disabled under 42 U.S.C. § 1382c.  Upon the death of the disabled beneficiary, the trust must reimburse the state benefits that were paid to him/her during life.  Amounts received pursuant to this trust will not diminish the amount of SSI that the disabled person is eligible to receive.

 

I.R.C. § 2511(a) – This section makes the federal gift tax applicable “whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible . . . .”  Thus, contributions to special needs trusts may subject the donor to federal gift tax liability.

 

I.R.C. § 2503(b) – This section provides the annual per donee exclusion.  It allows a donor to exclude the first $11,000 of gifts given to each donee each year.  Thus, a donor may contribute $11,000 to a special needs trust each year without incurring federal gift tax liability.  The amount of the annual per donee exclusion is subject to change.  In 2004, it is $11,000.

 

I.R.C. § 2041 – This federal estate tax section necessitates the inclusion of a 5 & 5 power in special needs trusts that include a withdrawal right.  This section includes in the gross estate any general power of appointment held by the decedent at his/her death.  Some powers that the decedent exercised or released during life may also be included in the gross estate.  If the disposition constituting the exercise or release of the power “is of such a nature that if it were a transfer of property owned by the decedent, such property would have been includible in the decedent’s gross estate under sections 2035 to 2038,” then the power is included in the gross estate.  The lapse of a power is considered a release of the power to the extent that the property subject to the power exceeds the greater of $5,000 or 5% of the total value of the assets that could have been used to satisfy the exercise of the power. 

 

I.R.C. § 2514 – This is the parallel federal gift tax section to I.R.C. § 2041.  It imposes gift tax on exercises or releases of general powers of appointment and provides the same rule as section 2041 for the lapse of a power.

 

I.R.C. § 671 – This section imposes federal income tax liability on the grantor of a trust to the extent that the grantor is treated as the owner of the trust.  Sections 672, 673, 674, 675, 676, 677, and 678 specify the circumstances under which the grantor is to be treated as the owner.

 

I.R.C. § 674(b)(7) – According to this section, if the grantor has a power to distribute trust income or accumulate trust corpus only during the legal disability of the income beneficiary, then the grantor is not to be treated as owner of the trust.  Thus, depending on the definition of “legal disability,” some special needs trusts may not be grantor trusts for federal income tax purposes.  The exception to the general grantor trust rule allowed by this section does not apply if the grantor has to power to add beneficiaries other than after-born or after-adopted children. 

 

I.R.C. § 2010 – This section allows a credit against federal estate tax liability and sets forth the applicable exclusion amount used to determine the amount of the unified credit.

 

I.R.C. § 2210 – This section repeals the federal estate tax for decedents dying after December 31, 2009. 

 

P.L. 107-16 – This section reinstates the federal estate tax for decedents dying after December 31, 2010.

 

I.R.C. § 2056 – This section creates a martial deduction for any property passed from the decedent to his/her surviving spouse to the extent that the property is included in the gross estate for federal estate tax purposes.

 

I.R.C. § 641 – This section imposes federal income tax on nongrantor trusts.

 

I.R.C. § 651 – This section allows an income tax deduction for simple nongrantor trusts.  The deduction is limited to the amount of distributable net income.

 

I.R.C. § 643 – This section defines distributable net income.

 

I.R.C. § 652 – This section imposes federal income tax liability on beneficiaries of simple nongrantor trusts which were allowed a deduction under section 651.  The beneficiaries are taxed on the amount of income required to be distributed whether it actually is or not.  If that amount exceeds the distributable net income, this section applies a ratio to determine the amount that the beneficiary is to be taxed on.  That amount retains the same character in the hands of the beneficiary that it had in the hands of the trust.

 

I.R.C. § 661 – This section parallels section 651 to allow a deduction for complex nongrantor trusts.  The deduction is limited to the amount of distributable net income.

 

I.R.C. § 662 – This section parallels section 652 to impose federal income tax liability on beneficiaries of complex nongrantor trusts which were allowed a deduction under section 662.  The beneficiaries are taxed on the amount of income required to be distributed whether it actually is or not.  If that amount exceeds the distributable net income, this section applies a ratio to determine the amount that the beneficiary is to be taxed on.  That amount retains the same character in the hands of the beneficiary that it had in the hands of the trust.

 

I.R.C. § 663(a) – This section disallows deductions under section 661 and inclusion in the beneficiary’s gross income under section 662 of any amounts paid as a gift or bequest of a specific sum of money or specific property  (paid either all at once or in 3 installments or less) and any charitable distributions.

 

I.R.C. § 2601 – This section imposes a federal tax on generation-skipping transfers.

 

I.R.C. § 2603(a) – The GST tax is to be paid by the transferee in the case of taxable distributions, by the trustee in the case of taxable terminations, and by the transferor in the case of direct skips.

 

I.R.C. § 2612 – This section defines taxable distributions, taxable terminations, and direct skips.

 

I.R.C. §§ 2621, 2622, 2623 – These sections determine the taxable amounts for GST transfers.

 

Section 4734 of the Balanced Budget Act of 1997 (42 U.S.C. § 1320a-7b(a)) –

 

            Whoever...(6) for a fee knowingly and willfully counsels or assists an individual [in] dispos[ing] of assets (including by transfer in trust) in order for the individual to become eligible for medical assistance under a State plan under title XIX, if disposing of the assets results in the imposition of a period of ineligibility for such assistance under section 1917...shall...(ii) in the case of such a statement, representation, concealment, failure, conversion, or provision of counsel or assistance by any other person, be guilty of a misdemeanor and upon conviction [be] fined not more than $10,000 or imprisoned for not more than one year, or both.

 

C.F.R. § 416.1201(a) – This section states that cash, liquid assets, and property qualify as resources for the purpose of calculating SSI benefits if the disabled individual owns the property and has the right to use it for his support and maintenance.

 

Social Security Programs Operations Manual System 01120.200(D)(2) – This section states that assets that constitute the principal of a trust are not resources for SSI eligibility purposes if the beneficiary of the trust has no legal authority to revoke the trust or use the assets for his/her own support.

 

42 U.S.C. § 1382(b) – This section states that SSI benefits may be reduced if the disabled individual receives any non-excludable “income.”

 

C.F.R. § 416.1102 – This section defines income “as anything that a recipient receives in cash or in-kind that can be used to meet the recipient’s needs for food, clothing, and shelter.”

 

Social Security Programs Operations Manual System 01120.200(E)(1) – This section states that distributions from a trust paid for food, clothing, or shelter for the beneficiary qualify as income for SSI eligibility purposes, which may result in a reduction in benefits.

 

42 U.S.C. 1396 et seq. – the Medicaid statutes.

 

CASES:[41]

 

Hecht v. Barnhart, 68 Fed. Appx. 244, 2003 WL 21510348 (2d Cir. N.Y. 2003) – The court upheld a determination by the Social Security Administration that funds from a special needs trust did not cause the beneficiary to be ineligible for SSI benefits, but that those benefits should be reduced by the amounts paid from the trust to the beneficiary’s parents for his room and board.  The court also affirmed the idea that although the Social Security Programs Operations Manual Systems are not “‘entitled to the same . . . deference as implementing regulations,’” they are “‘entitled to respect’ to the extent that they have the ‘power to persuade’” (citations omitted).

 

Linser v. Office of Attorney General, 672 N.W.2d 643. (N.D. 2003) – This case is an example of state law determining which assets are to be counted as resources in determining Medicaid eligibility.  Under North Dakota law, assets in a support trust are counted because they are deemed available to the beneficiary, but assets in a completely discretionary trust are not available unless they are actually distributed to the beneficiary.

 

Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968) – This cases establishes what later becomes known as a Crummey withdrawal right, which qualifies contributions to a trust for the annual per donee exclusion.

 

Myers v. SRS, 254 Kan. 467, 866 P.2d 1052 (Kan. 1994) – The court held that a discretionary trust, as distinguished from a support trust, cannot be considered as an available resource in determining eligibility for medical assistance under Kansas law.

 

BOOKS:

 

Ralph J. Moore & Ron M. Landsman, Planning for Disability, 816 Tax Management (BNA) (2000, Supp. 2003).

 

This portfolio provides a detailed analysis of various planning methods for individuals with disabilities and the tax treatment of those methods.  It includes information for disabled individuals about how to protect their own assets, but the section on “third party” planning is of particular interest.  This section specifically discusses estate planning for families with a disabled child and covers not only financial considerations, but also provisions for personal care.  Overall, this is an excellent resource for an estate planner.  Not only does it contain very specific information about how to draft discretionary special needs trusts, it also provides worksheets outlining the applicable Medicaid and SSI provisions.  It was last updated on 10/18/04.

 

L. Mark Russell et al., Planning for the Future: Providing a Meaningful Life for a Child with a Disability after Your Death (American Publishing Co. 1993).

 

This book addresses a variety of issues related to planning for a child with a disability, including special needs trusts, guardianships, government benefits programs, and taxes.  It focuses on the importance of developing a comprehensive life plan for the child and is written on a level that is fairly easy to understand.  Because this book was published in 1993, information gathered from it may need to be updated according to more recent changes in the law.

 

The Special Needs Trust and Its Use for Estate Planners and Litigators, Program Handbook, Continuing Education of the Bar, Oakland, California, May 2003.

 

These are CLE materials that discuss both self-settled and third party special needs trusts.  This book provides fairly comprehensive coverage of the topic.  Although it is California-specific, much of the information is applicable in other states.  This book provides several forms for drafting special needs trusts, requesting court orders to establish them, sending letters with instructions to a trustee, and more. 

 

Marlis Pörtner, Trust and Understanding: The Person-Centred Approach to Everyday Care for People with Special Needs (PCCS Books 2000).

 

This book does not specifically address issues related to special needs trusts, but it does address other personal care issues that should be considered in planning for a disabled child after the parents’ death.  It suggests a “person-centred” approach to help individuals reach their potential and discusses residential arrangements, education and training, and implications for caregivers.

 

Lawrence A. Frolik & Melissa C. Brown, Advising the Elderly or Disabled Client (Rosenfeld Launer Publications 1992).

 

This book has a section specifically devoted to financial planning for disabled adults after the deaths of their parents.  This section provides an overview of important considerations and various options in setting up a discretionary special needs trust.  It was published in 1992 and may need to be updated accordingly.

 

ARTICLES:

 

Marc S. Bekerman, Practice Considerations in Estate and Disability Planning, Probate & Property, May/June 1998, at 62-64.

 

This article breaks the estate and disability planning practice down into four stages:  information gathering, determining a plan, document preparation and execution, and post-execution practice.  For each stage the author provides a brief, but practical description of procedures that will help the estate planning process go smoothly.

 

Ira S. Wiesner, Special-Needs Trusts: How to Craft Them without Endangering a Disabled Beneficiary’s Access to Public-Aid Programs, Trusts and Estates, June 2003, at 24-28.

 

This article describes third-party special needs trusts.  It stresses the importance of familiarity with Medicaid and SSI benefits and the need to make the trust discretionary in order to protect those benefits.  It contains a brief discussion of possible language to be included in the trust to ensure discretionary distributions.

 

Keith Bradoc Gallant & Carolyn Reers, Sometimes It’s Better Not to Use a Special Needs Trust, Trusts and Estates, November 2003, at 30-35.

 

This article discusses the benefits of establishing an OBRA trust for disabled individuals who unexpectedly receive assets due to inheritance or a litigation award.  Potential downsides are also addressed.  The focus here is on protecting assets that belong to the disabled individual, rather than on helping parents provide for their disabled children.

 

Harry S. Margolis & Jeffrey A. Bloom, Special Needs Trust Without the Tax Hit?, Trusts & Estates, November 2003, at 54-57.

 

The tax hit referred to in the title of this article is that when money from a retirement plan is paid to a trust and remains there, rather than being distributed to the beneficiary, it is taxed at a higher rate than if it had been distributed.  This article suggest two possible remedies to this problem without depriving the beneficiary of the protection of a special needs trust:  naming a charitable remainder trust as the beneficiary of the retirement plan and creating a pass-through trust that grants complete discretion to the trustee.  The article warns that these two strategies are untested, so practitioners should proceed with caution.

 

Thomas D. Begley, Jr., Serving Special Needs, Trusts & Estates, June 2004, at 29-32.

 

This article discusses the mechanics of creating a self-settled special needs trust.  It also briefly outlines relevant Medicaid and SSI eligibility considerations.

 

Patricia Tobin, 20/20 Foresight: Planning Ahead for Special Needs Trusts, Probate & Property, May/June 1997, at 56-61.

 

This article provides a practical explanation of the reasons to use a special needs trust.  It touches on Medicaid and SSI eligibility and stresses the necessity of taking into account the needs of the individuals who are funding the trust, their families, and the beneficiary.  This article also mentions the possibility of criminal liability for trust creators who knowingly and willfully dispose of assets to become eligible for Medicaid (see 42 U.S.C. § 1320a-7b(a) above).

 

David J. Lillesand & Gina M. Nguyen, SSI Trust and Transfer Rules, National Academy of Elder Law Attorneys Quarterly, April 1, 2004, Vol. 17.

 

This is a detailed article written on a practitioner level.  To understand its contents, one should already have a basic understanding of special needs trusts, Medicaid, and SSI.  This article focuses on self-settled, rather than third party trusts.

 

Steve Dale, Designating a Special Needs Trust: A Three-Step Approach to Maintain Benefits and Reduce Taxes, National Academy of Elder Law Attorneys Quarterly, April 1, 2002, Vol. 15.

 

This article describes how to achieve the difficult balance of protecting a disabled child’s eligibility for needs-based programs and reducing tax liability.  The three steps it suggests are: (1) designate a trustee as beneficiary of the parent’s retirement plan and defer distributions as long as possible; (2) distribute trust proceeds to the disabled child; (3) deduct distributions from the trust to the disabled child when possible.  The article explains the basics of each of these steps and the minimum legal requirements to achieve them.  It provides a good overview of the tax and eligibility consequences of establishing a special needs trust.

 

G. Mark Shalloway, Selecting and Advising Trustees of a Special Needs Trust, National Academy of Elder Law Attorneys Quarterly, April 1, 2002, Vol. 15.

 

This article describes the considerations and consequences of choosing trustees for self-settled and third party special needs trusts.  Options included are: parents, family and professional co-trustees, a trustee advisory committee, and a trust protector.  This article also addresses various issues that the trustee may encounter, such as family occupancy of a residence owned by the special needs trust, funeral arrangements, the purchase of life insurance on a caregiver, and the need for continuing trustee education.

 

Robert Fleming & Stuart Morris, Taxation of Special Needs Trusts, National Academy of Elder Law Attorneys Quarterly, July 1, 2001, Vol. 14.

 

This article addresses both self-settled and third party special needs trusts.  It provides a brief overview of the income, gift, estate, and generation-skipping tax implications of these types of trusts.

 

Roger M. Bernstein, Special Needs Trusts: Administration and Compliance, National Academy of Elder Law Attorneys Quarterly, July 1, 2001, Vol. 14.

 

This article focuses on the impact of the OBRA on self-settled special needs trusts.  It emphasizes the importance of having a drafter who evaluates the individual client’s situation.  That way, the appropriate amount of flexibility may be incorporated into the trust’s language and funding.

 

Cynthia L. Barrett, Distribution Standard for the Special and Supplemental Needs Trust, National Academy of Elder Law Attorneys Quarterly, July 1, 2001, Vol. 14.

 

This article describes six common distribution standards that are included in special needs trusts and provides an example of each standard.  The six are: (1) mandatory support; (2) discretionary support; (3) fully discretionary, no mention of supplemental needs; (4) fully discretionary, precatory language; (5) strict, prohibiting food, clothing, shelter; (6) discretionary, explicit authority to reduce benefits.  The article briefly discusses the impact of each of these standards on the disabled child’s eligibility for federal and state funded programs.

 

SSA Issues Instructions on Trusts, National Senior Citizens Law Center Newsletter, March 16, 2001, Vol. 27, No. 11, at 43-46.

 

This brief article outlines the program operations manual system issued by the Social Security Administration dealing with the effect of trusts on Medicaid and SSI eligibility.

 

Stacey J. Gunya, Medicaid Planning with Special Needs Trusts, Kansas Current Issues in Elder Law, Kansas Bar Association Issues in Elder Law Conference, November 15, 2002, Vol. 2, at 45-51.

 

This article addresses in outline format the implications in Kansas of both self-settled and third party trusts.

 

Joan Lensky Robert & Charles Robert, Planning for Disability Helps Preserve a Client’s Assets, Estate Planning, August 1, 1996, Vol. 23, No. 7, at 311-19.

 

This article gives a good general explanation of available Medicaid and SSI benefits.  It does not go into much detail about special needs trusts, but focuses on the importance of good estate planning to make sure that assets are available for a client’s family after his/her death.

 

Joseph R. Pozzuolo & Audrey Mittleman, Special Needs Trust: An Estate Planning Tool for the Disabled, Journal of the American Society of CLU &ChFC, September 1995, Vol. 49, No. 5, at 64-70.

 

This article provides a basic description of special needs trusts and Medicaid benefits.  It also discusses holdings of courts in a few different states regarding the availability of trust assets for Medicaid purposes.  This article includes a sample special needs trust.

 

David J. Correira, Disability Trusts That Allow a Client to Qualify for Medicaid, 30 Est. Plan. 223, 2003 WL 1919491, May 2003.

 

This article gives a good overview discussion of the tax implications of establishing a special needs trust.  It addresses federal estate, gift, and income taxes and provides several examples of how they apply.  It also discusses a few cases from different states dealing with Medicaid eligibility. 

 

J. Mitchell Miller, J. Eagle Shutt & J. Matthew Miller, Medicaid and “The Granny’s Lawyer Goes to Jail” Law, Questioning the Criminalization of Attorney’s Advice, Criminal Justice Policy Review, March 2003, Vol. 14, No. 1, at 96-105.

 

This article explains the dilemma that lawyers who engage in estate planning face in light of section 4734 of the Balanced Budget Act of 1997 (42 U.S.C. § 1320a-7b(a)).  It discusses the history of Congress’s criminalization of asset-hiding for Medicaid purposes.  It then focuses on the conflict this creates with an attorney’s obligation to advise his/her clients to act in their own best interests.

 

Andrew H. Hook and Thomas D. Begley, Jr., When Is an Irrevocable Special Needs Trust Considered to be Revocable?, Estate Planning, April 2004, Vol. 31, No. 4, at 205-08.

 

This article addresses self-settled special needs trusts.  It explains that the doctrines of worthier title and merger may operate to render irrevocable special needs trusts revocable.  This could result in Medicaid and SSI ineligibility. 

 

Leslie Walker, Cynthia Gruman & Julie Robison, Medicaid Estate Planning: Practices and Perceptions of Medicaid Workers, Elder Law Attorneys, and Certified Financial Planners, The Gerontologist, August 1998, Vol. 38, No. 4, at 405-12.

 

This article discusses a Connecticut-based study regarding Medicaid estate planning.  The study attempts to supply empirical data to more fully inform the recent moral and political debate about Medicaid estate planning and its policy implications.

 

Lisa J. Wood, Estate Planning for Parents of Children with Disabilities, Exceptional Parent, November/December 1992, Vol. 22, No. 8, at 18-20.

 

This article briefly outlines the basic considerations for parents of children with disabilities.  It touches on the problems with just creating a simple will, suggests alternatives, and supplies questions for the parent’s to ask regarding their attorney’s ability to effectively plan for them.

 

Renee Colwill Lovelace, Finding More Funding for Your Child’s Special Needs Trust, Exceptional Parent, Vol. 34, No. 5, at 83-86.

 

This is a brief, but practical and easy-to-understand article that breaks down the funding of a special needs trust into three phases:  (1) prepare the special needs trust and plan; (2) ensure that funds get to the trust; (3) search for more funding sources.  Life insurance and retirement funds are examples of possible additional funding sources discussed here.

 

Stephen W. Dale, Choosing the Ideal Trustee of Your Child’s Special Needs Trust, Exceptional Parent, April 2004, Vol. 34, No. 4, at 65-68.

 

The author of this article is a former psychiatric nurse who later became an attorney.  He divides the attributes of the ideal trustee into three categories: (1) financial duties; (2) personal needs and advocacy; (3) accountability and keeping the special needs trust on track.  He then discusses the pros and cons of three models:  (1) the trustee is directed by a trust advisory committee; (2) the trustee is directed by a care manager; (3) co-trustees.

 

WEBSITES:

 

Disabilities Law Project

The Disabilities Law Project is a Pennsylvania non-profit law firm that works on behalf of individuals with disabilities and their families.  This website contains several publications pertaining to disability law.  The estate planning section includes information for families of persons with disabilities and for lawyers practicing in this area.  These articles provide a nice overview of the issues to consider in planning for a disabled person.

 

Missouri Family Trust

 

This is a non-profit organization, created by Missouri state statute, that administers special needs trusts for families in Missouri.  This website provides general information about special needs trusts, Medicaid and SSI eligibility, and the Missouri program.  This website is a must-see for individuals doing disability planning in Missouri.