Specal Needs Planning

Wednesday, June 29, 2011

Five Reasons to have a Revocable Trust

In past blogs, we have discussed the reasons of including trusts as part of your estate planning program.  We also outlined the differences between revocable and irrevocable trusts.  Here is a quick summary of the advantages of establishing a revocable trust:

  1. Avoids probate.
  2. Maintains control of your assets until your death or incapacity.
  3. Establishes your beneficiaries to inherit your estate after death.
  4. Establishes who will act as the fiduciary to settle your estate after death.
  5. Establishes Credit Shelter and/or Special Needs Trust provisions to:
  • Mitigate or avoid estate taxes.
  •  Care for a special needs individual without jeopardizing his or her government benefits.
  •  Avoid a minor having access to an inheritance at 18 years of age.

Tuesday, May 17, 2011

Duties of a Trustee

We have discussed in prior blogs various types of trusts. We have also discussed the necessity and importance of selecting the right trustee.  The purpose of this blog is to give our readers assistance in making that proper selection by advising them of the duties of a trustee.

For starters, a trust is a legal arrangement where one person, known as creator, grantor, settlor, or trustor, establishes a legal entity known as a trust, and selects a person or entity known as a trustee, who will hold legal title to property for another person, who is called a beneficiary. A trustee, therefore, should be someone in whom the grantor has great confidence, and whose qualities include using good sound judgment.  A trustee’s duties include, but are not limited to the following:
Fiduciary Duty
A trustee has a fiduciary duty to the initial beneficiary who is entitled to the income or principal of the trust, as well as the remainder beneficiaries, which are the people who will receive the trust assets upon the death of the initial beneficiary.  A fiduciary is held to a very high standard with respect to the prudence that he or she must show toward the trust assets.
Comprehensive Duty
A trustee has a duty to truly know and understand the terms of the trust. The terms of the trust are contained in the words that make up the trust, and act as instructions to the trustee with respect to what she/he can do with the asset, its income, and its remainder.  It may sound simple, but if you are a trustee, you must read and fully understand the trust, and/or hire a professional to help you.
Investor Duty
A trustee must be a prudent investor. This means that the trustee cannot be needlessly risky or speculative with respect to the assets for which she or he is responsible as trustee. It is not his or her money to invest but, in fact, is for the beneficiary.  The trustee must be careful to make sure that she or he protects the assets for the current beneficiary as well as the future remainder beneficiaries. Seeking high income may be a natural desire, but the trustee must be careful not to indulge in choices so risky that the assets could be lost.
Distribution Duty
Certain trusts allow the trustee discretion with respect to whether or not she or he should make distributions to the beneficiaries of the trust.   This discretion requires the trustee to evaluate the needs of the beneficiary and future beneficiaries, against the assets of the trust.

This may often require the trustee to tell the beneficiary that she or he cannot have any more money, which moves the trustee's role into the personal realm in addition to the legal.  This can be especially tricky when the beneficiary is a relative.
This duty should be taken very seriously when considering and/or selecting your trustee, as a professional trustee (such as a bank, trust company, attorney, a financial adviser, accountant, etc.), may have an easier time saying no to a loved one.
Monitoring the Trust Duty
The trustee must be organized and have some bookkeeping skills.  She or he need not become an expert in accounting, but must have some understanding of accounting/bookkeeping, so as to track income, distributions, and expenditures.
Certain trusts must file a tax return, and as with the above paragraph, the trustee need not become an accountant or professional tax preparer, but if a tax return is required to be filed, it is the trustee’s duty to insure that it gets done.  This may involve delegating the job to a professional, which is discussed immediately below.
Delegating Duties
The trustee will be responsible for delegating duties that she or he is not equipped to handle.  A good trustee does not have to be an accountant, skilled and able to prepare a tax return, or an attorney able to handle interpretation of the trust.  A good trustee must, however, be skilled at selecting the proper professionals to help him or her complete their role as trustee.
Trustee Fee
Both the creator of the trust and the selected trustee should know that a trustee is entitled to a reasonable fee for his or her services. This may be especially important for family members named as trustees as they often do not wish to accept the fees.  The job of a trustee may require a serious time commitment, so in order to insure the job is done well and without a “grudge,” it may be prudent to establish in writing that you, as the creator, direct the trustee to take his or her reasonable fee.
If a trusted professional such as a bank, trust company, or law firm, etc. is selected as trustee,  they are entitled to and will take a reasonable fee, whether it be an hourly fee, a percentage of the fees under which they are charged to oversee as a trustee, or something else.
Having the appropriate information on the duties of a trustee should help you better understand how to select a trustee and/or how to serve as a trustee.  As always, should you have further questions regarding the selection of Trustees, or any other legal matter, Maroney Associates invites you to call our offices.

Wednesday, April 20, 2011

Guardianship for Your Minor or Special Needs Child: The Human Factors

 In this Blog we will step outside of our legal counsel role and into the human aspects of selecting a Guardian for your minor child and/or special needs child.

It is critical that when you select a Guardian for your child, you have a very honest and open discussion with the person or persons that you are considering. Many people automatically believe that if something happened to them, a certain family member or friend would without hesitation or regret, take on this critical role in the life of their child. The fact is, however, sometimes those family members or friends may actually be reluctant or unable to take on such an important role.
Prior to selecting a Guardian and naming him or her in your legal documents, we suggest that you have an honest and open discussion about the fact that you would like them to accept this role.  Ask them to truthfully consider whether they would be ready, willing, and able to do this.  Also explain to them up front that it is okay to say they cannot, will not, and/or simply do not want to be selected for this awesome responsibility.  They may have great love and affection for you and your child, but simply cannot accept this responsibility, due to circumstances and/or challenges that they are facing in their own lives.
If you have a special needs child, the considerations are expanded exponentially.  In this case, we actually suggest that you prepare a lengthy written document setting forth anything and everything that you do on a daily basis with respect to your special needs child. We further suggest, if possible, you prepare a day in the life video.   You need to also think of everything that impacts your special needs child, such as certain music, books, songs, foods, and special places that benefit your child positively and/or that have a negative impact on your child.  This information will not only help the person whom you are asking to accept the role of Guardian to make the decision but will be critical if in fact something happens to you and your chosen Guardian suddenly finds themselves the full-time caretaker of your special needs child.
Here at Maroney Associates, we do not simply prepare elder, estate and special needs planning documents. We get to know our clients and raise these very critical issues, both legal and human, so as to assist our clients in making the best decisions possible.
Please contact us if you would like to further discuss decisions regarding Guardians for your minor and/or special needs child.

Thursday, April 7, 2011

Special People Have Special Needs

Many of our clients who have children, whether minors or adults, with special needs (mentally retarded, autism, Down’s syndrome, etc.), are specifically concerned about what will happen to the child after they pass away.  Put another way, they are fully engaged in taking care of this special needs person, but must consider what will happen when they are no longer around.

The case of a special needs person requires more than simply naming a guardian for your child.  This is something that will have a major impact on the life of this special needs person who not only needs someone to take care of them but needs someone to take care of any resources that they have in such a way that they do not disqualify the special needs person from government benefits to which they would otherwise be entitled.

For those of our clients who have a loved one with special needs we offer advice, guidance, and preparation of specific documents to address all of these needs.
First, if you have a loved one with special needs who is receiving benefits under a government entitlement programs, it is important to note that these programs are asset based, and can be lost if the special needs person has an amount of money that exceeds the government limit.  Sometimes the government programs limit the resources of the recipient to as low as $2000.  Leaving assets to such a person without consideration of these limitations can cause the special needs person to become disqualified for benefits until they use up all of their newly inherited assets.  Others who do know something about these issues often determine it best to disinherit that loved one or possibly leave his or her share to another loved one who promises to take care of the special needs person.  This is a very dangerous maneuver because the future of the person holding the money is uncertain and if they pass away, the monies will be distributed as part of their own estate.  If they get divorced, the monies could be subject to the taking by the divorcing spouse. Likewise, if they declare bankruptcy or get sued for a personal injury they might have caused someone, the assets of the special needs person may be in jeopardy.
A more dependable solution to these problems is what is known as a Special or Supplemental Needs Trust.  These special trusts allow monies to be held for the benefit of a special needs person in such a way that it will not disqualify that person’s eligibility for government assistance programs.  Of course, the details are critical, but in summary the concept is that the monies held in trust must be used to “supplement” but not replace the government benefits that are being provided to the special needs person.  In essence, the monies can be used for almost anything that would make the special needs person’s
life better, so long as the monies are not used to replace the government benefit that is being provided for that person.  For example, if shelter is provided for the special needs person, the monies cannot be used to buy a house.  However, if transportation is not provided as part of the government program, the monies out of the Special Needs Trust can be used to purchase transportation assistance.
There are several types of Special or Supplemental Needs trusts, and a complete explanation of each might be best covered in future blogs.  However, in summary, the differences are as follows.
A Third Party Supplemental Needs Trust is a trust set up during the lifetime by the grantor or maker of the trust.  The monies are not and never were in the name of the special needs person, but rather are coming from a third person who is funding a trust for the special needs person.  These trusts do not have any “pay back” provisions, meaning that at the end of the special needs person’s life, any money left in the trust can go to beneficiaries designated by the grantor.  There is no pay back to the government for benefits rendered to the special needs person.
Another type of special needs trust is known as the First Party Special Needs Trust.  This is when the special needs person at issue uses his or her own monies to fund the trust.  These funds often come from a law suit for personal injuries that caused the person to have special needs and issues about government benefit programs.  The money from the law suit can be used to fund the First Party Special Needs Trust that will be used in the same way as the above referenced Third Party Trust except there is a “pay back” provision.  At the end of the special needs person’s life, any monies left in the trust must be paid back to the government to the extent that the government provided benefits.  If there is any remainder after the government if paid back, then monies can be distributed to the beneficiaries set forth by the special needs person when he or she established the trust.
Finally, a Testamentary Supplemental Special Needs Trust is a trust that is set up in a person’s last will and testament.  This trust basically allows the person drafting the will to establish that if a certain person is on special needs government assistance at the time of their death, his or her share of the estate will be placed into a Special Needs Trust and used to supplement but not replace the government benefits of that person.
Future blogs will address funding a Special Needs Trust (using specific monies, life insurance policies and even real estate), as well as how to pick a special needs trustee, and the specific tasks that a special needs trustee must be aware of.  Meanwhile, please feel free to contact us for a consultation about this, or any other matter.

Based in Melville and Garden City, New York, the attorneys at the Law Offices of Maroney Associates, PLLC assist clients throughout Nassau County, Suffolk County, Queens, and the cities of Mineola, Hempstead, New Hyde Park, Franklin Square, Williston Park, Queens Village, Melville, Huntington, Farmingdale, Patchogue and Uniondale, NY.

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445 Broad Hollow Road, Suite 25, Melville, NY 11747
| Phone: 866-994-2025
1305 Franklin Avenue, Suite 160, Garden City, NY 11530
| Phone: 866-994-2025

Elder Law | Estate Planning for High Net Worth Individuals | Estate Planning | Business Succession Planning | Probate / Estate Administration | Planning for Children | Special Needs Planning | Guardianships | Real Estate | En Español

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