Should a Parent Serve as Trustee of a Supplemental Needs Trust?

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It is common for a parent to want to be named as trustee of a supplemental needs trust benefitting her child, especially when the parent is the one creating or funding the trust. There are many reasons why this makes sense. It positions the parent to have complete control over trust distributions. It is also very unlikely that anyone else can match the loyalty and dedication that comes from the bond between a parent and child. The parent is almost always the individual most familiar with the child’s specific, unique needs that the trust must seek to fulfill in its administration. Another advantage is that the parent will usually work without compensation.

Despite all this, a parent serving as trustee can also confront many daunting problems involving trust laws and public benefits regulations that affect the administration of a supplemental needs trust. The laws governing trusts vary from state to state, and public benefits rules can also vary in different parts of the country. The federal regulations and tax laws are complex, highly technical, and subject to change. Some parents also do not want to be trustees because it makes them the gatekeeper of the trust’s funds and may create friction when the child beneficiary requests a distribution the parents do not agree with.

The alternative for most families is a corporate trustee, which brings with it objectivity and knowledge in areas such as investments, accounting, tax and trust laws, and public benefits, that a parent often lacks.  Corporate trustees are trained to review on a regular basis the trust documents under their administration and take a business approach to trust disbursements. They also usually have systems in place to keep current with changes in trust and tax law, as well as public benefit programs rules.  

But, it is not unusual for a parent to feel uncomfortable giving so much responsibility for their child’s welfare to an impersonal professional trustee.  One solution is for the parent and professional trustee to serve together as co-trustees. The parent has a clear understanding of the family’s objectives and the needs of their child with a disability, while the professional trustee usually has expertise in financial matters and public benefits law. This is often a good combination for a trust of substantial size. In trusts involving smaller sums of money, the combination of a parent and a nonprofit organization as co-trustees might make more sense.

Perhaps an even better alternative is to consider the use of a trust protector to oversee the corporate trustee. A trust protector is an independent third party, either an individual or an institution, whose role is to “look over the shoulder” of the trustee to ensure that the trust is properly serving the purpose for which it was intended. The trust agreement typically details the trust protector’s responsibilities and areas of authority. One power often given a trust protector is the ability to remove and replace a corporate trustee. Naming a parent as trust protector allows the parent to have formal authority in the oversight of the trust.  The corporate trustee, who is more knowledgeable on the technical and legal trust issues, can then serve with the benefit of a parent’s insight into the particular needs of the child with disabilities.

A parent who wants to be involved in the operation of a supplemental needs trust benefitting his child is commendable and encouraged. But deciding whom to name as trustee, co-trustee or trust protector should involve a careful review of the talents the parent has, and perhaps more importantly, the talents the parent lacks. It is often the combination of a parent and a professional trustee in these roles that forms the best team to provide the most versatile support to the child with special needs.

If you or a loved one are considering establishing a supplemental needs trust, or if you are working with a trust that has these difficulties and you want to improve them, please contact our office for a free consultation to learn how we can help.

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Article posted by:

Kevin T. Horner, Esq.

Pierro, Connor & Associates, LLC

For more information on how we can help, or to get in touch with Kevin T. Horner, Esq. please contact Beth Wurtmann, Director of Marketing at Pierro, Connor & Associates, LLC:

Tel: 866-951-PLAN

Email: info@pierrolaw.com

The Roles of Trustee and Care Manager in Future Care Planning

Frequently clients realize that a supplemental needs trust is operated by a trustee.  Trustees fulfill many responsibilities.  They act as investment manager, bookkeeper, distribution manager, benefits advocate, and financial planner. Trustees are in constant contact with the beneficiary and the beneficiary’s caregivers regarding many aspects of the beneficiary’s life such as approving the purchase of a vehicle or even the purchase of a home.

This level of involvement can be confusing for beneficiaries and their families, who may be under the impression that the trustee has decision-making power in all aspects of a beneficiary’s life. If a trustee can approve or reject the proposed purchase price of a home for the beneficiary, can’t they also decide where the beneficiary lives? In general, the answer is no. 

While a trustee is very involved in making distributions from the trust and administering it, the trustee’s duties do not extend to day-to-day decisions that need to be made involving the management of the beneficiary’s care and placement. These decisions are typically assumed by a parent (or both parents), a close family member, or a guardian of the beneficiary who is acting as the beneficiary’s care manager.

The reason that these decisions are not taken on by trustees, is that while a trustee may have had the opportunity to get to know a beneficiary well, the family members of the beneficiary typically know how best to serve the beneficiary’s needs.  It is also true that a trustee might be chosen because of his or her ability to manage money and make sound financial decisions, but they would not know how to evaluate the ongoing needs of the beneficiary, locate benefits available to them, coordinate service providers or evaluate his or her overall well-being.  For this reason, it is important to include a care manager in your plan for the beneficiary’s entire lifetime. 

At Pierro, Connor & Associates, we have identified and met a critical need of our clients by incorporating care managers into our planning.  Our firm has created EverHome Care Advisors as a care manager service to provide support and coordination for our clients and their families.  EverHome ensures clients receive appropriate care with a quality of life he or she desires, locates appropriate public and private resources for their care and offers peace of mind by preserving family assets.

If you are interested in care manager services for you or your loved one, please call us today at (518) 459-2100 or at (844) 633-3852 (844-NEED-TLC).

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Article posted by:

Kevin T. Horner, Esq.

Pierro, Connor & Associates, LLC

For more information on how we can help, or to get in touch with Kevin T. Horner, Esq. please contact Beth Wurtmann, Director of Marketing at Pierro, Connor & Associates, LLC:

Tel: 866-951-PLAN

Email: info@pierrolaw.com

New to Incapacity Planning for Clients? Get Up to Speed!

Incapacity planning keeps money under management, provides an opportunity for product sales, and protects your clients. It’s a win/win, because estate planning is not just having a plan in place to deal with a client’s death; it’s also about having a plan in place to deal with what happens if a client becomes incapacitated.  There are many moving parts that need to be considered in incapacity planning. Here are a few highlights: 

●     What happens without an incapacity plan?

●     The essential documents for managing finances during incapacity

●     The essential documents for making healthcare decisions during incapacity

●     How to choose the right person to manage finances and make healthcare decisions

●     The importance of keeping an incapacity plan up to date

If you have any questions about incapacity planning or have a client who needs to create or update incapacity documents, please call our office now. We’d love to collaborate with you.

What happens with no incapacity plan in place?

Mental incapacity creates clients who are incapable of making informed decisions about their finances and well-being. Court-supervised guardianship and joint ownership problems are two ways things can go wrong without proper incapacity planning.

●        Guardianship: Without a plan in place, a judge can appoint someone to take control of the client’s assets and make all personal and medical decisions on their behalf under a court-supervised guardianship. This person may be a stranger or your client’s most despised relative. The client and their loved ones often lose valuable time, money, and control.

●        Joint ownership issues: Many clients may believe they are protected because they hold their assets in joint names with a spouse, a child, or other family members. While a joint account holder may be able to access a bank account to pay bills or a brokerage account to manage investments, a joint owner of real estate will not be able to mortgage or sell the property without the consent of all other owners.

Planning tip: Adding names to accounts or real estate titles may be deemed a gift for gift tax purposes. Using joint ownership is a risky proposition for everyone involved.

Only a comprehensive incapacity plan will protect the client and the client’s assets from these and other pitfalls.

The essential documents for financial management during incapacity

There are two essential legal documents for managing finances that must be in place before a client becoming incapacitated:

1.       Power of attorney: This legal document gives an agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document. Powers of Attorney come in two forms: “durable” and “springing.” A durable power of attorney goes into effect as soon as it is signed, while a springing power of attorney only goes into effect after the person who has made the document is determined to be mentally incapacitated.

Planning tip: Make sure your legal department is going to honor your clients’ powers of attorney; if not, notify the client (and us if possible) immediately so that we can get a plan in place that will work.

2.       Revocable living trust: This legal document has three parties to it: the person who creates the trust (the “grantor”); the person who manages the assets transferred into the trust (the “trustee”); and the person who benefits from the assets transferred into the trust (the “beneficiary”). In the typical revocable living trust situation, the grantor is also the trustee and beneficiary of their trust. But if the grantor/trustee/beneficiary becomes incapacitated, then someone else is named to step in as the successor trustee and manage the trust assets for the benefit of the incapacitated grantor/beneficiary.

Planning tip: Be sure appropriate assets (non-retirement assets) are titled in the name of your clients’ trusts. If they’re not, ask permission to chat with us to determine whether they should be. A trust can only control assets titled in its name, so proper and complete funding of the client’s trust is vitally important.

To be part of an effective incapacity plan, a revocable living trust should contain provisions to determine the mental status of the grantor/trustee/beneficiary through a private process (i.e., an attending physician, the opinion of two physicians, or some other method) instead of a public court process. Also, the trust agreement should contain specific instructions about how to take care of an incapacitated grantor/beneficiary. Many older trusts or poorly-drafted new trusts omit these terms. If you aren’t sure whether a trust has these provisions, contact us so we can assist you in reviewing and updating the document.

The must-have document for healthcare decision-making

A Health Care Proxy is the essential legal document for making healthcare decisions that must be in place prior to becoming incapacitated.  This legal document gives an agent the authority to make healthcare decisions if the person signing the document becomes incapacitated.  Also, Federal and state laws dictate who can receive medical information without the written consent of the patient. This legal document also gives a doctor or other health care provider authority to disclose medical information to the agent selected by the patient.

A client’s loved ones may be denied access to medical information during a crisis and end up in court fighting over what medical treatment the client should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years). Without these documents, a judge may also appoint a guardian to oversee the client’s health care, thereby adding further expense and hassle. Clients should have these documents examined and frequently updated to ensure they accurately reflect their wishes.

How to choose the right agents for an incapacity plan

There are two very important decisions clients must make when putting together their incapacity plan: who will be in charge of managing their finances during incapacity, and who will be in charge of making their medical decisions during incapacity. Factors clients should consider when deciding who to name as their agents include:

●     Where does the agent live? With modern technology, the distance between the client and the agent matters far less than it once did. Nonetheless, someone who lives close by may be a better choice than someone who lives in another state or country.

●     How busy is the agent? If the agent has a demanding job or frequently travels for work, then they may not have time to take care of the client’s finances and medical needs.

●     Does the agent have relevant expertise? An agent with work or life experience in finances or medicine may be a better choice than one without it.

Planning tip: Choosing the wrong person to serve as financial or health care agent will result in an ineffective incapacity plan because the plan requires a qualified agent to carry it out. Clients need to carefully consider who to choose as their agent and then discuss their decision with that person to confirm that they will, in fact, be willing and able to serve. 

Are the incapacity plans of your clients up to date?

As time passes by and the lives of your clients change, their incapacity plans will become outdated. It is important for clients to have their incapacity plan reviewed every three to five years or after a major life event (such as a divorce or death) to best ensure that the plan will work the way they intend it to work if it is ever needed.

Please contact our office to discuss incapacity planning opportunities and to schedule plan reviews for your clients.

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Article posted by:

David S. Staggs, LL.M., Esq.

Attorney at Pierro, Connor & Associates, LLC

For more information on how we can help, or to get in touch with David S. Staggs, Esq. please contact Sarah Beach, Director of Marketing at Pierro, Connor & Associates, LLC:

Tel: 866-951-PLAN

Email: info@pierrolaw.com

Dispute About Mother’s Nursing Home Turns Hostile

A New Jersey appeals court rules that an ugly dispute between two brothers over their mother's placement in a nursing home did not amount to domestic violence. R.G. v. R.G. (N.J. Super. Ct., App. Div., No. A-0945-15T3, March 14, 2017).

R.G was the attorney-in-fact and primary caregiver for his parents. After R.G.'s mother fell ill, R.G. wanted to place his mother in a nursing home. R.G's brother objected to this plan, but R.G. went ahead and had his mother admitted to a nursing home without his brother's consent. R.G.'s brother sent angry and threatening texts and emails to R.G. as well as emails expressing his desire to find a way to care for their parents in their home. Eventually, the men got into a physical altercation in which R.G.'s brother shoved R.G.

R.G. filed for a restraining order against his brother under the Prevention of Domestic Violence Act. The trial judge ruled that R.G. was harassed and assaulted and issued the restraining order. R.G.'s brother appealed, arguing that R.G. did not meet the definition of a victim of domestic violence.

The New Jersey Superior Court, Appellate Division, reverses, holding that R.G.'s brother's actions did not amount to domestic violence. The court finds that there was insufficient evidence that R.G.'s brother purposely acted to harass R.G., ruling that "a mere expression of anger between persons in a requisite relationship is not an act of harassment."

(For the full text of this decision, go to: http://www.judiciary.state.nj.us/opinions/a0945-15.pdf)

It’s difficult to get all family members on the same page if you wait too long to discuss care plans.  Our advice is to talk about it early and often.  If, however, a situation you're involved in becomes contested, our firm is prepared to represent you and your interests to the fullest extent.  Call us today for a free initial consultation

To read more on these related issues, click Here

Article posted by:

Aaron E. Connor, Esq. 

Partner at Pierro, Connor & Associates, LLC

For more information on how we can help, or to get in touch with Aaron E. Connor, Esq. please contact Beth Wurtmann, Marketing Director at Pierro, Connor & Associates, LLC:

Tel: 866-951-PLAN

Email: info@pierrolaw.com

Reviewing the Three New ABLE Programs Available Nationwide

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ABLE accounts are a relatively new planning tool available to individuals with disabilities.  The Achieving a Better Life Experience (ABLE) Act, signed by President Obama in 2014, allows individuals who meet certain criteria to open and hold assets in an account that will not be counted as a resource for the purposes of public benefits.  At the same time, the account beneficiary has more control and access to the funds than with a traditional special needs trust.

Because ABLE accounts are created under the same IRS regulations that allow for 529 accounts used to fund higher education, they are qualified savings accounts that receive preferred federal tax treatment. In order to use an ABLE account, the individual’s disability must have had its onset prior to the age of 26.  The disability must also meet the requirements for either the Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) programs and the individual must be receiving those benefits or certify that he or she has the documentation of a physician regarding disability.

To date, 17 states have ABLE programs and several others, including New York, are developing their programs.  Even if your state does not have a program yet, this does not mean that you or a loved one is barred from opening an ABLE account.  A person with disabilities may open an account in any state that has an ABLE program allowing out-of-state residents to open ABLE accounts. It is important to note, however, that an individual cannot have more than one ABLE account.

Here are details on three state programs that allow out-of-state residents to open accounts:

Michigan launched the MiABLE program on November 1, 2016. The account can be opened by the individual, a parent, an agent under a power of attorney, or a legal guardian. There are five different investment options for MiABLE beneficiaries that vary in degree of risk and in cost. This means that you have the option to grow your money in a way that suits your risk tolerance. Michigan also allows for a state income tax deduction of $5,000 for individuals and $10,000 for joint filers. Another interesting feature of the account is that MiABLE has given beneficiaries the ability to create public profiles to solicit donations from friends, family, and even strangers, similar to the format used for websites like GoFundMe which typically have been considered available funds to the beneficiaries. 

Oregon launched its national program called ABLE for All in 2016. The program offers three investment options: Conservative, Moderate and Aggressive. There is also an FDIC-insured cash option that is appropriate for those planning on spending money from the account in the near future. ABLE for All will also soon be launching prepaid cards that beneficiaries can use to access their funds. An interactive website dashboard allows beneficiaries to set savings goals for themselves.

Virginia opened ABLE Now Virginia in 2016 and it is available nationwide to eligible individuals regardless of their state of residency. The account offers an ABLEnow Debit Card that gives individuals immediate access to their account. The first $2,000 deposited in the account is automatically allocated to the FDIC-insured deposit account linked to the card. Like Oregon’s ABLE for All, Virginia’s account offers three investment options -- Conservative, Moderate and Aggressive -- as well as a money market account that is 100 percent cash and cash equivalents.

These three programs are only a sample of the programs available.  It is important to do your research when selecting an account and to make a determination based on what is best for you or your loved one.  Your special needs planner can assist in this evaluation process especially as programs are created in your state.

If you or a loved one are interested in learning more about ABLE accounts or establishing one for your loved one with disabilities, please contact Pierro, Connor & Associates for a free consultation.

Article posted by:

Kevin T. Horner, Esq.

Pierro, Connor & Associates, LLC

For more information on how we can help, or to get in touch with Kevin T. Horner, Esq. please contact Beth Wurtmann, Director of Marketing at Pierro, Connor & Associates, LLC:

Tel: 866-951-PLAN

Email: info@pierrolaw.com