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Upstate Estate Law, P.C. Blog

Special Needs Trusts For A Disabled Spouse

January 10, 2017

If your spouse is disabled and has qualified to receive Supplemental Security Income (SSI) and/or Medicaid benefits, you will need to carefully consider how to provide your Spouse with an inheritance, or else those benefits be endangered. The resource and income limits required in order to qualify for SSI and Medicaid are very low. A poorly planned inheritance to your Spouse can result in disqualification from these vital programs.

There are a number of planning techniques that can be utilized in order to prevent this disqualification. They include converting counted resources into exempt resources, such as using the inheritance to fund the purchase of a home, car, a pre-need funeral contract, or a qualified-Medicaid annuity for the benefit of the disabled Spouse. Another technique is the establishment of a third-party Special Needs Trust.

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Filed under: Estate Planning, Legal Posts, Medicaid, Trusts

Posted By: Christopher Miller

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Medicaid Update: Special Needs Trusts

December 14, 2016

Medicaid Special Needs Trusts have received much needed legislative attention from the United States Congress and President of the United States. HR 34 was signed into law by President Obama on December 13, 2016. Title 5, Section 5007 of HR 34 is entitled “Fairness In Medicaid Supplemental Needs Trusts” and contains exactly two sentences designed to correct a 23 year old omission made in the Social Security Act.

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Filed under: Legal Posts, Medicaid, Trusts

Posted By: Christopher Miller

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SSA Directs Local Offices to Give Specifics When Rejecting Trusts

March 14, 2016

The Social Security Administration recently issued an Emergency Message to all personnel requiring workers to specifically inform SSI applicants or beneficiaries of the reasons a special needs trust has been rejected by the agency. And elder law attorneys everywhere say thank you!

In the past, when the SSA determined that assets in an SSI beneficiary’s or applicant’s trust were countable, the agency would frequently send a notice of ineligibility to the beneficiary or applicant because his/her assets exceeded the resource limit. However, this notice almost never explained the reasoning behind the SSA’s rejection of the trust.

The new Emergency Message, which went out to all field level SSA personnel, requires caseworkers to spell out exactly what portion of the Program Operations Manual System (POMS) applies to the trust being rejected. Unfortunately, the Emergency Message does not tell field workers that they have to explain their reasoning in plain English — merely citing the appropriate section of the POMS appears to be enough. While this will make it relatively easy for professionals to determine what went wrong with a trust and whether an appeal is in order, it will likely give the layperson little if any guidance about his or her trust.

To read the Emergency Message, go here.

Filed under: Legal Posts, Medicaid, Trusts

Posted By: Christopher Miller

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What Is An Inter Vivos Trust versus a Testamentary Trust?

December 6, 2015

I get this question pretty frequently. The terms above refer to two very general categories of trusts.

An inter vivos trust is a trust that was created during the lifetime of its creator (the Grantor or Trustor).

A testamentary trust is set up upon the death of its creator, usually in the creator’s Last Will and Testament.

Some distinctions are that an inter vivos trust may be freely revocable and modifiable by its creator during his/her lifetime, whereas the testamentary trust is typically irrevocable, except under certain circumstances. The inter vivos trust may be set up to accomplish asset management, incapacity planning, or Medicaid planning for its creator. A testamentary trust is useful to protect the creator’s eventual beneficiaries from dissipating their inheritance through immaturity, creditors’ claims, divorce, and the like.

These two trust types probably represent the most general distinction that can be made among trusts. Make no mistake though, there are a lot of different types of trusts that can be created. In future posts, I will write more about these different types of trusts.

Filed under: Estate Planning, Legal Posts, Trust Administration, Trusts

Posted By: Christopher Miller

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Greenville Estate Attorney A to Z: “Bypass Trust”

April 10, 2011

A BYPASS TRUST (also called a credit shelter trust, the “B” trust of the “AB” trust arrangement, or the family trust) is a type of trust typically set up by a married couple that is concerned about estate tax liability.

The bypass trust is set up to receive that amount of assets that equals the amount of the federal estate tax exemption in effect when the first spouse dies.  It is called a bypass trust because the assets contained in the trust escape estate taxation when the surviving spouse passes away, in effect, ‘bypassing’ estate taxation in the surviving spouse’s estate.

The beneficiary of the bypass trust is usually the surviving spouse, but this is actually not required. Children of the first spouse to die are often included as beneficiaries as well.

The requirements of the bypass trust are rather simple. It is usually funded by a provision in a Last Will or Revocable Living Trust which in effect states that it is to be funded up to the amount of the federal estate tax exemption amount (there are numerous ways that this funding provision can be drafted, but it is usually easily recognized once you see it).

Other requirements are that the surviving spouse is typically entitled to all the income from the bypass trust, plus a portion of the principal of the trust each year equal to the greater of $5,000.00 or 5% of the principal.  The surviving spouse may have some power to appoint the bypass trust assets upon death to certain beneficiaries that he or she names, this is called a limited power of appointment. (*A limited power of appointment cannot be included in the event that it is expected that the bypass trust will be funded as a result of a qualified disclaimer by the surviving spouse.)

The surviving spouse may be the sole trustee of the bypass trust, but this requires some restrictive language if the bypass trust allows for the making of discretionary principal distributions from the trust. The language allowing distributions must state that distributions from the trust may only be made for the health, education, maintenance, and support of the surviving spouse. If there is a co-trustee serving with the surviving spouse, the co-trustee can be given broad discretion to make distributions for the welfare of the surviving spouse. It is typically beneficial to have a co-trustee serve alongside the surviving spouse.

The bypass trust offers a method by which spouses whose estates will be valued near the federal estate tax exclusion amount can be sure to take full advantage of each of their estate tax exclusions. It should not be attempted without professional help, it takes more than just signing the trust document to make it work, the ownership of assets will most likely need to be rearranged as well.

I will revisit the bypass trust once I make my way to P, when I will discuss the new estate tax concept of Portability.

Like any decent lawyer, I need to add a disclaimer here: unfortunately, it is impossible to offer comprehensive legal advice over the internet, no matter how well researched or written. And remember, reviewing this website and my blogs doesn’t make you a client of my Firm: before relying on any information given on this site, please contact a legal professional to discuss your particular situation. 

Filed under: Estate Planning, Legal Posts, Trusts

Posted By: Christopher Miller

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